# generated by /homes/nber/adrepec/bin/nbrred running on mysql0
Template-Type: ReDIF-Paper 1.0
Title: How Pervasive is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows
Author-Name: Joseph E. Gagnon
Author-Person: pga415
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI IFM
Number: 3946
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3946
File-URL: http://www.nber.org/papers/w3946.pdf
File-Format: application/pdf
Publication-Status: published as Oxford Economic Papers, 1995.
Abstract: This paper looks for dynamic patterns in international trade flows using comprehensive multilateral American and Japanese data disaggregated to the four-digit SITC level. Little evidence is found of product-cycle dynamics between 1962 and 1988. Rather, goods that begin the sample in surplus (deficit) almost always remain in surplus (deficit) throughout the sample.
Handle: RePEc:nbr:nberwo:3946
Template-Type: ReDIF-Paper 1.0
Title: The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will it Last?
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI IFM
Number: 3947
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3947
File-URL: http://www.nber.org/papers/w3947.pdf
File-Format: application/pdf
Publication-Status: published as S. Haggard and S. Webb eds., "Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment" New York, Oxford University Press, 1994. pp. 61-88
Abstract: This paper asks why developing country policymakers have been so reluctant to undertake trade reform until the 1980s, and why many of them have embraced open trade policies so wholeheartedly since then. To answer these questions, the paper develops a heuristic index of the "political cost-benefit ratio" (PCBR) of policy reform. The PCBR is a measure of the amount of redistribution of income generated for every dollar of efficiency gain achieved by reform. Judged by this index, trade reform performs very poorly: liberalization typically leads to five dollars of income being reshuffled within the economy for every dollar of net efficiency gain. However, when the liberalization is undertaken at a point of deep macroeconomic crisis and in conjunction with stabilization policies, the value of the PCBR index falls dramatically. This explains why trade reform is politically so difficult in normal times, and why times of crisis provide an opportune moment for undertaking structural reforms. The paper concludes by evaluating the sustainability of the reforms of the 1980s.
Handle: RePEc:nbr:nberwo:3947
Template-Type: ReDIF-Paper 1.0
Title: Convergence and Growth Linkages Between North and South
Author-Name: John F. Helliwell
Author-Person: phe368
Author-Name: Alan Chung
Note: EFG
Number: 3948
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3948
File-URL: http://www.nber.org/papers/w3948.pdf
File-Format: application/pdf
Publication-Status: published as North-South Linkages and International Macroeconomic Policy, Vines, Davidand David Currie, eds., Cambridge: Cambridge University Press, 1995,pp. 77-100.
Abstract: Using cross-sectional data for 98 countries for 1960-85, this paper shows that growth of per capita GDP depends negatively on initial income levels, as implied by the convergence hypothesis, as well as on international differences in investment rates in physical and human capital. There is some evidence of slight economies of scale (1.06) among the industrial countries. The evidence in favor of the convergence hypothesis is strongest for the countries of the OECD and Latin America, and weakest for Asia. Growth in Latin America and Africa is lower than elsewhere even after allowing for international differences in initial income levels, scale, schooling and capital investment. Analysis of Solow residuals for the OECD countries (for which capital stock data are available) shows convergence in rates of technical progress, suggesting that convergence of per capita GDPs is not Just a function of differences in investment rates. The linkage between per capita GDP and the real exchange rate is found to be strong for the OECD and Asia, weak for Africa and negative for Latin America.
Handle: RePEc:nbr:nberwo:3948
Template-Type: ReDIF-Paper 1.0
Title: Shocking Aspects of European Monetary Unification
Author-Name: Tamim Bayoumi
Author-Person: pba366
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: ITI IFM
Number: 3949
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3949
File-URL: http://www.nber.org/papers/w3949.pdf
File-Format: application/pdf
Publication-Status: Published in "Adjustment and Growth in the European Monetary Union", Fransisco Torres and Francesco Giavazzi eds, Cambridge University Press; Cambridge, 1993
Abstract: Data on output and prices for 11 EC member nations are analyzed to extract information on underlying aggregate supply and demand disturbances using a VAR decomposition. The coherence of the underlying shocks across countries and the speed of adjustment to these shocks are then compared to the results from US regional data. We find that the underlying shocks are significantly more idiosyncratic across EC countries than across US regions, which may indicate that the EC will find it more difficult to operate a monetary union. However a core of EC countries, made up of Germany and her immediate neighbors, experience shocks of similar magnitude and cohesion as the US regions. EC countries also exhibit a slower response to aggregate shocks than US regions, presumably reflecting lower factor mobility.
Handle: RePEc:nbr:nberwo:3949
Template-Type: ReDIF-Paper 1.0
Title: Is There a Conflict Between EC Enlargement and European Monetary Unification?
Author-Name: Tamim Bayoumi
Author-Person: pba366
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: ITI IFM
Number: 3950
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3950
File-URL: http://www.nber.org/papers/w3950.pdf
File-Format: application/pdf
Publication-Status: published as Greek Economic Review, 1993
Abstract: Recent proposals for enlarging the European Community to include the EFTA countries raise the question of whether the new members should participate in a European Monetary Union. In part, the issue hinges on the incidence of aggregate supply and demand disturbances. We use data on prices and output and a VAR decomposition to analyze this issue empirically, grouping economies according to the magnitude of the disturbances, their cross-country correlation, and speeds of response. This leads us to distinguish an EC "core" (made up of Germany and its immediate neighbors) and an EC periphery (made up of the UK and the Southern European members of the Community). Austria, Sweden and Switzerland behave more similarly to the EC core than do Norway, Finland and Iceland. This suggests that the case for EMU participation is stronger for Austria, Sweden and Switzerland than for the other EFTA countries.
Handle: RePEc:nbr:nberwo:3950
Template-Type: ReDIF-Paper 1.0
Title: The Role of International Organizations in the Bretton Woods System
Author-Name: Kathryn M. Dominguez
Author-Person: pdo227
Note: ITI IFM
Number: 3951
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3951
File-URL: http://www.nber.org/papers/w3951.pdf
File-Format: application/pdf
Publication-Status: published as A Retrospective on the Bretton Woods System, edited by Michael Bordo and Barry Eichengreen. Chicago: The University of Chicago Press, 1993.
Publication-Status: published as The Role of International Organizations in the Bretton Woods System, Kathryn M.E. Dominguez. in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, Bordo and Eichengreen. 1993
Abstract: This paper examines the roles played by organizations in maintaining the Bretton Woods System. Theory indicates that even if countries understand that cooperation will lead them to a Pareto superior outcome, they need not cooperate unless they are convinced that other countries are also committed to doing so. In this context international organizations can facilitate cooperation by serving as commitment mechanisms. Cooperation in the Bretton Woods System involved the maintenance of stable exchange rates and unrestricted trade among member countries. The commitment mechanisms that the Bretton Woods Institutions provided member countries included: rules of cooperation, financial resources to enable them to play by the rules, and a centralized source of information on each others' commitment to the rules. Post-war history suggests that information monitoring and sharing has been a relatively effective commitment mechanism for international organizations.
Handle: RePEc:nbr:nberwo:3951
Template-Type: ReDIF-Paper 1.0
Title: Is Arbitration Addictive? Evidence From the Laboratory and the Field
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Henry S. Farber
Note: LS
Number: 3952
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3952
File-URL: http://www.nber.org/papers/w3952.pdf
File-Format: application/pdf
Publication-Status: published as Industrial Relations Research Association Papers and Proceedins, Jan. 1993
Abstract: We test for the presence of an addictive effect of arbitration (positive state dependence) using data both from a laboratory bargaining experiment and from the field. We find no evidence of state dependence in the experimental data, and we find weak evidence of positive state dependence in the field data on teachers in British Columbia. Hence, we reject the view that use of arbitration per se leads to state dependence either through reducing uncertainty about the arbitral process or through changing the bargaining parties' perceptions about their opponents. The results further suggest that an explanation for any positive state dependence we find in the British Columbia field data must lie in an aspect of the arbitration process which is not captured by our simple experimental design.
Handle: RePEc:nbr:nberwo:3952
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Flexibility, Volatility, and the Patterns of Domestic and Foreign Direct Investment
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI IFM
Number: 3953
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3953
File-URL: http://www.nber.org/papers/w3953.pdf
File-Format: application/pdf
Publication-Status: published as "Exchange Rate Flexibility, Volatility, and Domestic and Foreign Direct Investment," from International Monetary Fund Staff Papers, Vol. 39, No. 4, pp . 890-922 (December 1992).
Abstract: The goal of this paper is to investigate the factors determining the impact of exchange rate regimes on the behavior of domestic investment and foreign direct investment (FDI), and the correlation between exchange rate volatility and investment. We assume that producers may diversify internationally in order to increase the flexibility of production: being a multinational enables producers to reallocate employment and production towards the more efficient or the cheaper plant. We characterize the possible equilibria in a macro model that allows for the presence of a short-run Phillips curve, under a fixed and a flexible exchange rate regime. It is shown that a fixed exchange rate regime is more conducive to FDI relative to a flexible exchange rate, and this conclusion applies for both real and nominal shocks. The correlation between investment and exchange rate volatility under a flexible exchange rate is shown to depend on the nature of the shocks. If the dominant shocks are nominal, we will observe a negative correlation, whereas if the dominant shocks are real, we will observe a positive correlation between exchange rate volatility and the level of investment.
Handle: RePEc:nbr:nberwo:3953
Template-Type: ReDIF-Paper 1.0
Title: Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model
Author-Name: Zvi Bodie
Author-Person: pbo569
Author-Name: Robert C. Merton
Author-Person: pme203
Author-Name: William F. Samuelson
Note: AP
Number: 3954
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3954
File-URL: http://www.nber.org/papers/w3954.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Dynamics and Control, Vol. 16 (July/October 1992).
Abstract: This paper examines the effect of the labor-leisure choice on portfolio and consumption decisions over an individual's life cycle. The model incorporates the fact that individuals may have considerable flexibility in varying their work effort (including their choice of when to retire). Given this flexibility, the individual simultaneously determines optimal levels of current consumption, labor effort, and an optimal financial investment strategy at each point in his life cycle. We show that labor and investment choices are intimately related. The ability to vary labor supply ex post induces the individual to assume greater risks in his investment portfolio ex ante. The model explains why the young (enjoying greater labor flexibility over their working lives) may take greater investment risks than the old. It also offers an explanation as to why consumption spending is relatively "smooth" despite volatility in asset prices. Finally, the paper provides a compact method for valuing the risky cash flows associated with future wage income.
Handle: RePEc:nbr:nberwo:3954
Template-Type: ReDIF-Paper 1.0
Title: Estimating Expected Exchange Rates Under Target Zones
Author-Name: Zhaohui Chen
Author-Name: Alberto Giovannini
Note: ITI IFM
Number: 3955
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3955
File-URL: http://www.nber.org/papers/w3955.pdf
File-Format: application/pdf
Publication-Status: published as Chen, Z. and A. Giovannini. "Target Zones And The Distribution Of Exchange Rates: An Estimation Method," Economics Letters, 1992, v40(1), 83-89.
Publication-Status: published as Zhaohui Chen & Alberto Giovannini, 1998. "Estimating Expected Exchange Rates Under Target Zone Regimes," International Journal of Theoretical and Applied Finance, vol 01(01), pages 43-59.
Abstract: This paper develops a simple econometric procedure for estimating expected exchange rate under target zones. We employ the linear projection methodology to make predictions without relying on any prior structural or distributional assumptions, and at the same time demonstrate that such a methodology has to be modified in an important way to account for the presence of the fluctuation band. Our empirical results show that the band effect is nontrivial for narrow target zones such as the Bretton Woods system. We also develop a method to estimate the shapes of the unconditional distributions of exchange rates under target zones. The empirical results show that the unconditional distributions of exchange rates can take several different shapes, which may correspond to possibly widely different monetary and exchange-rate intervention policies. We also show how to use the projection equations and the information about the band to test the credibility of the exchange rate regimes.
Handle: RePEc:nbr:nberwo:3955
Template-Type: ReDIF-Paper 1.0
Title: Exploring the Relationship Between R&D and Productivity in French Manufacturing Firms
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Jacques Mairesse
Author-Person: pma712
Note: PR
Number: 3956
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3956
File-URL: http://www.nber.org/papers/w3956.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, Annals of Econometrics, vol.65, no. 1, pp.263-293, January, 1995
Abstract: This paper uses a newly available dataset on the R&D performance of individual French manufacturing firms for the 1980s to replicate and update a series of studies on French R&D and productivity growth at the firm level during the 1970s. The focus of the paper is on the use of a single dataset to evaluate the robustness of the methods commonly used to measure the private returns to R&D. We investigate the consequences of varying specifications and estimations. and in particular that of using different measures of R&D (knowledge) capital and of double counting corrections. Our main findings are the following: first. having a longer history of R&D expenditures helps in predicting the productivity growth of firms, but the choice of depreciation rate for R&D capital makes little difference to the results. Second, the correction for double counting of R&D expenditures in capital and labor is important and converts a measured "excess" rate of returns to a total rate of return to R&D. Third. we show that the direct production function approach to measuring the returns to R&D capital is preferred on several grounds over the rate of returns variation which has been used in the past. Finally, the productivity, of knowledge capital in the production function is uniformly positive, fairly robust, and correlated with permanent firm or industry effects.
Handle: RePEc:nbr:nberwo:3956
Template-Type: ReDIF-Paper 1.0
Title: Testing Trade Theory
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI IFM
Number: 3957
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3957
File-URL: http://www.nber.org/papers/w3957.pdf
File-Format: application/pdf
Publication-Status: published as Surveys in International Trade, ed. by David Greenaway and L. Alan Winters, Basil Blackwell Publishers, 1994. pp. 66-106.
Abstract: This review of the empirical literature in international micro economics observes that data have had a disappointingly small effect on the intellectual lives of international economists. The reasons for this are many and diverse, but one general comment is made here: We need better balance between the three layers of the argument: the issues, the theory and the data. The profession as a whole is imbalanced in favor of theory. But most of the empirical work is also imbalanced. Some empirical studies take the theory too seriously and lose track of the issues. Others do not take the theory seriously enough and try to make do with ad hoc but inappropriate empirical models. Some of these which lack the theory layer lack as well any clear issues. We need better balance.
Handle: RePEc:nbr:nberwo:3957
Template-Type: ReDIF-Paper 1.0
Title: A Model of the Optimal Complexity of Rules
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE
Number: 3958
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3958
File-URL: http://www.nber.org/papers/w3958.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law, Economics and Organization, vol. 11, no. 1, pp. 150-163(April 1995).
Abstract: Rules often are complex in order to distinguish different types of behavior that may have different consequences. Greater complexity thus allows better control of behavior. But individuals may need to incur costs ex ante to determine how more complex rules apply to their contemplated conduct. Because of such costs, some individuals will choose not to learn complex rules. Also, applying more complex rules ex post to determine applicable rewards or penalties is costly. This article models the effects of complexity on individuals' decisions to acquire information, choices about whether to act, and reports of their actions to an enforcement authority. It considers how optimal sanctions depend on the complexity of rules and determines when more complex rules improve welfare.
Handle: RePEc:nbr:nberwo:3958
Template-Type: ReDIF-Paper 1.0
Title: Have Commercial Banks Ignored History?
Author-Name: Sule Ozler
Note: ITI IFM
Number: 3959
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3959
File-URL: http://www.nber.org/papers/w3959.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 83, no. 3 (1993): 608-620.
Abstract: This paper investigates the impact of past defaults. and of recently acquired sovereignty on the terms of bank loans for developing countries in the 1970s. We control for countries' repayment indicators and for a measure of their political stability. Our findings are that: 1) The repayment difficulties of the period prior to the 1930s do not have a statistically significant impact on the credit terms. In contrast. the defaults of the 1930s and the post war defaults and repayment difficulties do have a statistically significant impact on credit terms. These findings are in contrast to those studies that focused on crises periods in these markets. Our results suggest that countries' repayment behavior influence their later market access. 2) Nations that achieved sovereignty recently were charged higher rates than nations that were sovereign before the 1940s. In fact. recently sovereign borrowers were charged as high rates as the defaulters of the former episodes. This finding suggests that markets attach risk premium for new institutions.
Handle: RePEc:nbr:nberwo:3959
Template-Type: ReDIF-Paper 1.0
Title: External Shocks, Politics and Private Investment: Some Theory and Empirical Evidence
Author-Name: Sule Ozler
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI IFM
Number: 3960
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3960
File-URL: http://www.nber.org/papers/w3960.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Development Economics July, 1992
Abstract: The manner in which the political system responds to external economic shocks in developing countries is a key determinant of the private investment response. We look at a simple model of political-economic equilibrium to make this intuition more precise. and develop the idea of a "political transmission mechanism." Even in the confines of this simple model, we find that ambiguities abound: domestic politics can magnify or dampen the effect of the external shock. In our empirical work. we find that a high level of urbanization magnifies the investment reduction in response to an external shock. This is consistent with the supposition that high levels of urbanization are conducive to distributive politics with pernicious economic effects. We also find that the provision of political rights is conducive to superior private investment behavior.
Handle: RePEc:nbr:nberwo:3960
Template-Type: ReDIF-Paper 1.0
Title: Bank Exposure, Capital and Secondary Market Discounts on the Developing Country Debt
Author-Name: Sule Ozler
Author-Name: Harry Huizinga
Note: ITI IFM
Number: 3961
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3961
File-URL: http://www.nber.org/papers/w3961.pdf
File-Format: application/pdf
Abstract: Previous empirical studies of secondary market discounts for developing countries have ignored important creditor country factors. The empirical evidence in this paper indicates that, after controlling for repayment indicators of borrower countries, bank exposure and capital are important determinants of secondary market discounts: an increase in the exposure of large banks to a particular country leads to a decrease in the secondary market discounts on the debt of that country, while an increase in the capital of large banks leads to an increase in secondary market discounts. Among the repayment indicators of developing countries, only debt ratios are found to be significant determinants of the discounts. We suggest that the impacts of exposure and capital can be explained by the presence of deposit insurance. The evidence presented on the stock market pricing of lender banks supports this view.
Handle: RePEc:nbr:nberwo:3961
Template-Type: ReDIF-Paper 1.0
Title: Social Security Rules and Marginal Tax Rates
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Andrew Samwick
Author-Person: psa395
Note: PE
Number: 3962
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3962
File-URL: http://www.nber.org/papers/w3962.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal, Vol. 45, No. 1, pp. 1-22, (March 1992).
Abstract: The social security payroll tax has become the largest tax paid by the majority of American households. Although, the statutory marginal social security tax rate is the same for all those with wage and salary income up to the maximum level, the complex rules linking social security taxes and subsequent benefits imply that the net marginal social security tax on individual earnings varies substantially among individuals. For some taxpayers, the net marginal social security tax is equal to the statutory rate, while for other taxpayers the combined effect of the tax and the resulting benefits implies a very much lower net marginal tax rate or even a negative marginal tax rate when the incremental benefits exceed the additional taxes.
Handle: RePEc:nbr:nberwo:3962
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Housing: Old Questions, New Answers
Author-Name: James M. Poterba
Author-Person: ppo19
Note: PE
Number: 3963
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3963
File-URL: http://www.nber.org/papers/w3963.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review Vol. 82, May 1992, pp. 237-242
Abstract: This paper sketches how the tax reforms of the 1980s affected the incentives and distortions associated with tax policy toward housing markets. There are three principal conclusions. (1) Reductions in marginal tax rates, particularly for high-income households, reduced the tax-induced distortion in the user cost of owner-occupied housing. This lowered the deadweight losses associated with the favorable tax treatment of homeownership. (2) The increase in the standard deduction in the Tax Reform Act of 1986 (TRA86) removed several million middle-income homeowners who previously itemized from the ranks of itemizers. For these households TRA86 raised the marginal cost of owner-occupied housing. These changes also exacerbated the regressive nature of the mortgage interest subsidy. In 1988, more than half of the tax losses associated with mortgage interest deductions accrued to the 8% of taxpayers with the highest economic incomes. (3) TRA86 reduced incentives for rental housing investment, contributing to the decline in new multifamily housing starts from 500,000 per year in 1985 to less than 150,000 in 1991. In the long-run these policies will lead to higher rents.
Handle: RePEc:nbr:nberwo:3963
Template-Type: ReDIF-Paper 1.0
Title: Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980s
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS
Number: 3964
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3964
File-URL: http://www.nber.org/papers/w3964.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review Volume 82, No. 2,pp. 546-551 May 1992
Abstract: This paper examines changes in the distribution of income and consumption in the United States during the 1980s. using data from the Current Population Survey (income) and Consumer Expenditure Survey (consumption). We reach three primary conclusions. First. changes in the distribution of consumption parallel changes in the distribution of income. The lowest quintile of the consumption distribution received 0.9 percentage points less of total consumption in 1988 than in 1980; the corresponding decline for income was 0.6 percentage points. Second. broad conclusions concerning recent changes in the consumption distribution are not very sensitive to the exact choice of a measure of family needs. Under a wide variety of alternative household equivalence scales. there is a widening in the consumption distribution in the 1980s. Third. the usc of consumption measures of well-being in place of measures based on current money income docs change conclusions concerning the extent of poverty in the United Stales. Using the official federal poverty thresholds. we find that the overall consumption poverty rate was three percentage points below the income poverty rate in 1988. Comparisons of the poverty rates of the elderly and the non-elderly are substantially affected by the choice of poverty measure. The consumption poverty rare for the elderly was only 60 percent of the rate for adults and one-third of the rate for children in 1988.
Handle: RePEc:nbr:nberwo:3964
Template-Type: ReDIF-Paper 1.0
Title: Twenty-two Years of the NBER-ASA Quarterly Economic Outlook Surveys: Aspects and Comparisons of Forecasting Performance
Author-Name: Victor Zarnowitz
Author-Name: Phillip Braun
Author-Person: pbr232
Number: 3965
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3965
File-URL: http://www.nber.org/papers/w3965.pdf
File-Format: application/pdf
Publication-Status: published as Business Cycles, Indicators and Forecasting, edited by James Stock and Mark Watson, Studies in Business Cycles Vol 28, Chicago: University of Chicago Press, 1993
Publication-Status: published as Twenty-two Years of the NBER-ASA Quarterly Economic Outlook Surveys: Aspects and Comparisons of Forecasting Performance, Victor Zarnowitz, Phillip Braun. in Business Cycles, Indicators, and Forecasting, Stock and Watson. 1993
Abstract: The National Bureau of Economic Research, in co-operation with the American Statistical Association, conducted a regular quarterly survey of professional macroeconomic forecasters for 22 years beginning in 1968. The survey produced a mass of information about characteristics and results of the forecasting process. Many studies have already used some of this material. but this is the first comprehensive examination of all of It, This report addresses several subjects and produces findings on each, as follows: (I) The distributions of error statistics across the forecasters: the dispersion among the individual predictions is often large and it typically increases with forecast horizon, as do the mean absolute (or squared) errors. (2) The role of the time-series properties of the target data: the more volatile the time series, the larger as a rule are the errors of the forecasts. (3) The role of revisions in "actual" data: forecast errors tend to be larger the greater the extent of the revisions. (4) Differences by subperiod: there is little evidence of an overall improvement or deterioration in forecasts between the 1970s and the 19805. (5) Combining the individual forecasts into group mean or "consensus" forecasts: this generally results in large gains in accuracy. (6) Comparisons with a well-known macroeconometric model: the group forecasts are more accurate for most but not all variables and spans. (7) Comparisons with state-of-the-art time series models: the group forecasts and at least half of the individual forecasts tend to outperform Bayesian vector autoregressive models in most (but not all) cases. The univariate ARIMA forecasts arc generally the weakest.
Handle: RePEc:nbr:nberwo:3965
Template-Type: ReDIF-Paper 1.0
Title: The Budget and Trade Deficits Aren't Really Twins
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: ITI PE EFG IFM
Number: 3966
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3966
File-URL: http://www.nber.org/papers/w3966.pdf
File-Format: application/pdf
Publication-Status: published as Challenge, 35/2, March/April 1992, pp.60-63.
Abstract: Although the link between the U.S. budget deficit and trade deficit in the 1980s was so clear that the two were popularly labeled the twin deficits, it is wrong to generalize from the American experience of the 1980s to the conclusion that budget deficits and trade deficits are two sides of the same coin. An increased budget deficit (or other reduction in national saving) must reduce either private investment or net exports but the division between them depends on certain key parameters and on changes in the external environment. Although more than 90 percent of the savings decline in the United States in the first half of the 19805 was offset by an increase in the international deficit and the associated capital inflow, this was not an inevitable result. Without the powerful incentives for business investment in the 1981 tax legislation, there might have been less investment and a smaller increase in the trade deficit. The response to a reduction in national saving is not likely to be the same in the long run as in the short run. In my earlier studies with Charles Horioka and Phillipe Baccheua I found that sustained differences in saving rates among developed countries lead to similar differences in investment rates. This paper updates the earlier analyses to the decade of the 19805 and shows that among the G-7 countries the decade-average savings retention coefficient was 0.73. implying that nearly three-fourths of each additional dollar that was saved in a country remained in that country. The United States now appears to be moving from the "short run" in which the capital inflow offsets a decline in national saving to the "long run" in which lower domestic saving reduces domestic investment. Although national saving in 1990 was an even smaller fraction of GNP than in 1986 (because of the decline in private saving), the capital inflow fell from a peak of 3.5 percent of GNP in 1987 to 1.7 percent of GNP in 1990. As a result, net private domestic investment was reduced to only about 3 percent of GNP in 1990.
Handle: RePEc:nbr:nberwo:3966
Template-Type: ReDIF-Paper 1.0
Title: On the Design and Reform of Capital Gains Taxation
Author-Name: Alan J. Auerbach
Author-Person: pau33
Note: PE
Number: 3967
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3967
File-URL: http://www.nber.org/papers/w3967.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (May 1992): 263-267.
Abstract: After reviewing recent work on the feasibility of taxing capital gains on accrual or in an equivalent manner. This paper develops and presents simulations of a model of household behavior. aimed at assessing the efficiency effects of this and other tax reforms, The model accounts for the portfolio choice and intertemporal consumption distortions that capital gains taxes induce under current law. Among the simulation results are; 1. Eliminating the "lock-in" effect through a revenue-neutral move to accrual taxation causes national saving to decline, as households face a lower tax on present consumption from appreciated assets and. by reallocating existing wealth more efficiently, need to save less for future contingencies. Despite reducing saving, however. such a reform increases economic efficiency. 2. A simple reduction in the rate of capital gains taxation reduces national saving even for very high intertemporal elasticities of substitution, because of the additional income effect associated with reduced taxes on previously accumulated gains and the more efficient reallocation of existing wealth. However, making the tax cut prospective. although increasing saving. delays portfolio rebalancing and need not improve efficiency.
Handle: RePEc:nbr:nberwo:3967
Template-Type: ReDIF-Paper 1.0
Title: Menus of Linear Income Tax Schedules
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Philippe Weil
Author-Person: pwe97
Note: PE
Number: 3968
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3968
File-URL: http://www.nber.org/papers/w3968.pdf
File-Format: application/pdf
Abstract: Relative to traditional piecewise linear income taxation schemes, it is possible to increase government revenues by offering to consumers a menu of linear income tax schedules. In the resulting Pareto-superior equilibrium, consumers sort themselves out according to their (unobservable) productivity level, with high productivity agents choosing the tax schedules with low marginal tax rate and high intercept. This scheme extracts from the economy an unexploited source of revenue which, in contrast with standard supply-side proposals, does not depend on the economy being on the downward-sloping side of the Laffer curve.
Handle: RePEc:nbr:nberwo:3968
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Aggregate Price Level: Implications For Economic Performance and Policy
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG PR
Number: 3969
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3969
File-URL: http://www.nber.org/papers/w3969.pdf
File-Format: application/pdf
Publication-Status: published as "Price Stabilization in the 1990s: Domestic and International Policy Requirements," edited by Kumiharu Shigehara, pp. 233-268. Hampshire, England: The Macmillan Press, Ltd, 1993.
Abstract: Inaccurate measures of the aggregate price level may distort short-run policy decisions and may produce misleading comparisons of productivity growth across decades and among nations. This paper serves a dual purpose of reviewing compactly the vast American literature on price and output measurement, and of identifying special aspects of American methods which affect international comparisons of inflation and output growth. The traditional problem of substitution bias in the Consumer Price Index (CPI) is of minor importance compared with the bias introduced by new products, changes in the quality of existing products, and outlet substitution bias. The quality bias for U.S. consumer durables has recently been estimated to be roughly 1.5 percent per year for the postwar period, and roughly 3 percent per year for consumer durables, The only available study of outlet substitution bias estimates a 2 percent annual rate for food in the 1980s. Cross-country differences in measurement methods tend to overstate the recent productivity performance of U.S. relative to European manufacturing, with an understatement for U.S. nonmanufacturing. Both European and U.S. manufacturing performance are probably understated relative to Japan, which seems to do the best job of incorporating new products and correcting for quality change of high tech goods.
Handle: RePEc:nbr:nberwo:3969
Template-Type: ReDIF-Paper 1.0
Title: What is Productivity: Capacity or Welfare Management?
Author-Name: Charles R. Hulten
Note: PR
Number: 3970
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3970
File-URL: http://www.nber.org/papers/w3970.pdf
File-Format: application/pdf
Abstract: A number of recent papers have examined the role of environmental variables in accounting for economic growth, and have concluded that net measures of national product are superior to gross measures in portraying the outcome of the growth process. This paper argues that the two measures are not substitutes, but complements which reveal different aspects of economic growth: gross product is the output concept for estimating the structure of production. while net product is the correct concept for getting at the welfare consequences of economic growth. It is then shown that this capacity-welfare nexus is mirrored in the Hicksian and Harrodian definitions of technical change. An alternative to the conventional Solow growth accounting framework is presented in which the change in national wealth is decomposed into components corresponding to labor input and the Harrodian rate of technical change.
Handle: RePEc:nbr:nberwo:3970
Template-Type: ReDIF-Paper 1.0
Title: Growth Accounting When Technical Change is Embodied in Capital
Author-Name: Charles R. Hulten
Note: PR
Number: 3971
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3971
File-URL: http://www.nber.org/papers/w3971.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 82, no. 4 (1992): 964-980.
Abstract: Many technological innovations are introduced through improvements in the design of new investment goods, thus raising the possibility that capital-embodied technical change may be a significant source of total factor productivity growth. There are, however, no systematic estimates of the size of the embodiment effect. This paper attempts to fill this gap by merging the estimates of quality change obtained from the price literature on quality change with a version of the conventional sources of growth model which allows for both embodied and disembodied technical change. This resulting estimates suggest that as much as 20 percent of the total factor productivity in growth U.S. manufacturing industry over the period 1949-83 is due to the embodiment effect. It is also found that for the equipment used in U.S. manufacturing, best practice technology may be as much as 23 percent above the average level of technical efficiency.
Handle: RePEc:nbr:nberwo:3971
Template-Type: ReDIF-Paper 1.0
Title: The Intergenerational Mobility of Immigrants
Author-Name: George J. Borjas
Author-Person: pbo44
Note: LS
Number: 3972
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3972
File-URL: http://www.nber.org/papers/w3972.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 11, no. 1, part 1 (1993): 113-135.
Abstract: This paper analyzes the intergenerational mobility of immigrants. Using the 1940-1970 Censuses, the study reveals an important link between the earnings of immigrants and the earnings of their American-born children. Although there is some regression towards the mean, the earnings of second-generation Americans are strongly affected by variables describing economic conditions in the source countries of their parents. Current immigration policy, therefore, determines not only how immigrants perform in the labor market, but also determines tomorrow's differences in the labor market experiences of American-born ethnic groups.
Handle: RePEc:nbr:nberwo:3972
Template-Type: ReDIF-Paper 1.0
Title: The Fall in Private Pension Coverage in the U.S.
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: AG LS
Number: 3973
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3973
File-URL: http://www.nber.org/papers/w3973.pdf
File-Format: application/pdf
Publication-Status: Published as "The Fall in Private Pension Coverage in the United States", American Economic Review, Vol. 82, no. 2 (1992): 539-545.
Abstract: This study documents the 1980s fall in pension coverage and shows that it was concentrated most heavily on men, especially on the young and less educated. We find evidence that changes in real earnings and deunionization account for a sizeable portion of the fall in pension coverage. By contrast, we find little evidence that pension coverage fell because of a twist away from pensions in the tradeoff between pensions and other forms of compensation. With the possible exception of changes in the tax deductibility of contributions to individual retirement accounts, we also find little evidence that pension coverage declined because of institutional changes that reduced the attractiveness of pensions to employees or employers.
Handle: RePEc:nbr:nberwo:3973
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Effects and the Monetary Transmission Mechanism
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Note: EFG ME
Number: 3974
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3974
File-URL: http://www.nber.org/papers/w3974.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Papers and Preceedings Vol. 82, No. 2, pp. 346-353 May 1992
Abstract: Several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment. Existing quantitative general equilibrium models, which allow for capital accumulation, are inconsistent with this view. There does exist a recently developed class of general equilibrium models which can rationalize the contemporaneous response of interest rates, output, and employment to a money supply shock. However, a key shortcoming of these models is that they cannot rationalize persistent liquidity effects. This paper discusses the basic frictions and mechanisms underlying this new class of models and investigates one avenue for generating persistence. We argue that once a simplified version of the model in Christiano and Eichenbaum (1991) is modified to allow for extremely small costs of adjusting sectoral flow of funds, positive money shocks generate long-lasting, quantitatively significant liquidity effects, as well as persistent increases in aggregate economic activity.
Handle: RePEc:nbr:nberwo:3974
Template-Type: ReDIF-Paper 1.0
Title: Equilibrium Asset Prices With Undiversifiable Labor Income Risk
Author-Name: Philippe Weil
Author-Person: pwe97
Note: AP
Number: 3975
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3975
File-URL: http://www.nber.org/papers/w3975.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Dynamics and Control, Vol. 16, nos. 3/4 (1992): 769-790 .
Abstract: In a two-period Lucas tree economy in which ex ante identical, but ex post dissimilar, agents face undiversifiable labor income risk, calibrating a (wrong) representative agent model results in overstating the equilibrium riskfree rate and in understanding the equilibrium equity premium if the utility function exhibits decreasing absolute risk aversion and decreasing absolute prudence. These behavioral assumptions provide, as a consequence, a theoretical rationale for the often advanced conjecture that non-traded risk contributes to the solution of the riskfree rate and equity premium puzzles.
Handle: RePEc:nbr:nberwo:3975
Template-Type: ReDIF-Paper 1.0
Title: Precautionary Saving and Consumption Smoothing Across Time and Possibilities
Author-Name: Miles Kimball
Author-Person: pki97
Author-Name: Philippe Weil
Author-Person: pwe97
Note: AP
Number: 3976
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3976
File-URL: http://www.nber.org/papers/w3976.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit, and Banking, vol. 41, no. 2-3, March-April 2009, pp. 245-284.
Abstract: This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the precautionary saving motive in a two-period model with Selden/Kreps-Porteus preferences. For small risks, we derive a measure of the strength of the precautionary saving motive which generalizes the concept of "prudence" introduced by Kimball (1990b). For large risks, we show that decreasing absolute risk aversion guarantees that the precautionary saving motive is stronger than risk aversion, regardless of the elasticity of intertemporal substitution. Holding risk preferences fixed, the extent to which the precautionary saving motive is stronger than risk aversion increases with the elasticity of intertemporal substitution. We derive sufficient conditions for a change in risk preferences alone to increase the strength of the precautionary saving motive and for the strength of the precautionary saving motive to decline with wealth. Within the class of constant elasticity of intertemporal substitution, constant-relative risk aversion utility functions, these conditions are also necessary.
Handle: RePEc:nbr:nberwo:3976
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Productivity in the Telecommunications Equipment Industry
Author-Name: G. Steven Olley
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: IO PR
Number: 3977
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3977
File-URL: http://www.nber.org/papers/w3977.pdf
File-Format: application/pdf
Publication-Status: published as Olley, S., and Pakes, A., 1996. The dynamics of productivity in the telecommunications equipment industry. Econometrica, 64(6), 1263-1297.
Abstract: Technological change and deregulation have caused a major restructuring of the telecommunications equipment industry over the last two decades. We estimate the parameters of a production function for the equipment industry and then use those estimates to analyze the evolution of plant level productivity over this period. The restructuring involved significant entry and exit and large changes in the sizes of incumbents. Since firms' choices on whether to liquidate and on the quantities of inputs demanded should they continue depend on their productivity, we use an equilibrium model to suggest an estimation algorithm that takes into account the relationship between productivity on the one hand. and both input demand and survival on the other. A fully parametric version of the estimation algorithm would be both computationally burdensome and require a host of auxiliary assumptions. So we develop a semi parametric technique which is both consistent with a quite general version of the theoretical framework and easy to use. The algorithm produces markedly different estimates of both production function parameters and of productivity movements than traditional estimation procedures. We find an increase in the rate of industry productivity growth after deregulation. This in spite of the fact there was no increase in the average of the plants' rates of productivity growth, and there was actually a fall in our index of the efficiency of the allocation of variable factors conditional on the existing distribution of fixed factors. Deregulation was, however, followed by a reallocation of capital towards more productive establishments (by a down sizing, often shutdown. of unproductive plants and by disproportionate growth of productive establishments) which more than offset the other factors' negative impacts on aggregate productivity.
Handle: RePEc:nbr:nberwo:3977
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Collective Bargaining Legislation on Disputes in the U.S. Public Sector: No Policy May Be the Worst Policy
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Sheena McConnell
Note: LS
Number: 3978
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3978
File-URL: http://www.nber.org/papers/w3978.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law and Economics, October 1994
Abstract: This paper estimates the impact of collective bargaining legislation on disputes during labor negotiations in the U.S. public sector. We use a large national sample of U.S. state and local government contracts to compare the incidence and intensity of disputes by similar workers under different forms of collective bargaining legislation. The breadth of our data allows us to examine the impact of five different forms of legislation. Our principal finding is that strike costs, measured by strike duration and the number of working days lost, are highest in jurisdictions that provide no explicit framework for bargaining or dispute resolution.
Handle: RePEc:nbr:nberwo:3978
Template-Type: ReDIF-Paper 1.0
Title: Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance
Author-Name: Jeffrey I. Bernstein
Author-Person: pbe327
Note: PR
Number: 3979
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3979
File-URL: http://www.nber.org/papers/w3979.pdf
File-Format: application/pdf
Publication-Status: published as The Scandinavian Journal of Economics, Vol. 94, 1992 Supplement, pp. 95-105(1992).
Abstract: This paper develops a model of the production of life insurance services. The focus is on price setting ability and the cost advantages from size and diversity. The model characterizes insurers decisions on the face value and number of policies and the number of insurance lines. The model is applied to Canadian life insurance firms. Price-cost margins average from 13% to 40%. These margins emanate from information spillovers generated by marketing activities. Cost advantages due to size are small, but are substantial from diversity. Returns to scale average from 1.13 to 1.40, while returns to scope average from 70% to 100%.
Handle: RePEc:nbr:nberwo:3979
Template-Type: ReDIF-Paper 1.0
Title: Sectoral Shifts and Unemployment in Interwar Britain
Author-Name: S. Lael Brainard
Note: LS
Number: 3980
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3980
File-URL: http://www.nber.org/papers/w3980.pdf
File-Format: application/pdf
Publication-Status: published as With David M. Cutler, published as "Sectoral Shifts and Cyclical Unemployment Reconsidered", Quarterly Journal of Economics, Vol. 108, no. 1 , (1993): 219-243.
Abstract: This paper measures the importance of sectoral shifts, as against aggregate shocks and changes in search intensity, in explaining the persistent high unemployment that prevailed in interwar Britain. It develops a new measure of sectoral shifts that captures the arrival of information about reallocation shocks by using the cross-section variation in sectoral stock market excess returns over time. The cross-section variation series accounts for roughly one-quarter of the average level of aggregate unemployment during the interwar period, even after controlling for a variety of shocks to aggregate demand, and for roughly one-half of the variation in unemployment, suggesting an important role for sectoral shifts.
Handle: RePEc:nbr:nberwo:3980
Template-Type: ReDIF-Paper 1.0
Title: State Infrastructure and Productive Performance
Author-Name: Catherine J. Morrison
Author-Name: Amy Ellen Schwartz
Author-Person: psc654
Note: PR
Number: 3981
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3981
File-URL: http://www.nber.org/papers/w3981.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 86, no. 5 (December 1996): 1095-1111.
Abstract: The impact of public infrastructure investment on the productive performance of firms has been an important focus of the recent literature on productivity growth. The size of this impact has important implications for policymakers' decisions to invest in public capital, and productivity analysts' evaluation of productivity growth fluctuations and declines. However, detailed evaluation of the infrastructure impact is difficult using existing studies which rely on restricted models of firms' technology and behavior. In this paper we construct a more complete production theory model of firms' production and input decisions. We then apply our framework to state-level data on the output production and input (capital, nonproduction and production labor and energy) use of manufacturing firms to evaluate the contribution of infrastructure to firms' costs and productivity growth. We find that infrastructure investment does provide a significant direct benefit to manufacturing firms and thus augments productivity growth. We also show, however, that this evidence should be interpreted taking into account the social cost of such capital (which is not reflected in firms' costs), and the indirect impact resulting from scale effects.
Handle: RePEc:nbr:nberwo:3981
Template-Type: ReDIF-Paper 1.0
Title: Price Margins and Capital Adjustment: Canadian Mill Products and Pulp and Paper Industries
Author-Name: Jeffrey I. Bernstein
Author-Person: pbe327
Note: PR
Number: 3982
Creation-Date: 1992-01
Order-URL: http://www.nber.org/papers/w3982
File-URL: http://www.nber.org/papers/w3982.pdf
File-Format: application/pdf
Publication-Status: published as International Journal of Industrial Organization 10, pp. 491-510 (1992).
Abstract: The purpose of this paper is to estimate a model incorporating noncompetitive behaviour in product and factor markets, In addition, capital accumulation is subject to adjustment costs so that firms are not constrained to be in long-run equilibrium. The model is applied to two major Canadian manufacturing industries: pulp and paper and mill products. The results show for both industries in each of the three product markets and the wood input market that there is competitive behaviour. In addition, the industries are not in long-run equilibrium as marginal adjustment costs cause marginal profit to exceed the rental rate on capital. With the industries exhibiting short-run competitive behaviour in product and factor markets, new estimates are derived for scale economies and rates of technological change. Unlike the results from other studies, both industries exhibit small scale economies and positive rates of technological change.
Handle: RePEc:nbr:nberwo:3982
Template-Type: ReDIF-Paper 1.0
Title: Disinflation With Imperfect Credibility
Author-Name: Laurence Ball
Author-Person: pba605
Note: EFG ME
Number: 3983
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3983
File-URL: http://www.nber.org/papers/w3983.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, December 1994.
Abstract: This paper presents a theory of the real effects of disinflation. As in New Keynesian models, price adjustment is staggered across firms, As in New Classical models, credibility is imperfect: the monetary authority may not complete a promised disinflation. The combination of imperfect credibility and staggering yields more plausible results than either of these assumptions alone. In particular, an announced disinflation reduces expected output if credibility is sufficiently low.
Handle: RePEc:nbr:nberwo:3983
Template-Type: ReDIF-Paper 1.0
Title: Do Tougher Licensing Provisions Limit Occupational Entry? The Case of Dentistry
Author-Name: Morris M. Kleiner
Author-Name: Robert T. Kudrle
Note: LS
Number: 3984
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3984
File-URL: http://www.nber.org/papers/w3984.pdf
File-Format: application/pdf
Abstract: The effect of licensing as a mechanism to control entry into occupations has been a neglected area of both regulation and labor market research. This study examines the role of occupational licensing for entry into dentistry, an occupation with standards that vary by state. Our research first closely replicates Freeman's previous work on labor market cobwebs by employing national data to examine purely market phenomena in the determination of training for the dental profession. We subsequently approximate the government barrier to practice in the profession by adding a weighted average state examination pass rate to the previous model. Next, we employ pooled cross-section time series analysis to explore market determinants of professional entry with state level data. Finally, these results are supplemented by measures of statutory and pass rate entry restrictiveness. Our most consistent evidence suggests that a higher state licensing failure rate deters entry into dental practice.
Handle: RePEc:nbr:nberwo:3984
Template-Type: ReDIF-Paper 1.0
Title: Pensions and Wage Premia
Author-Name: Edward Montgomery
Author-Name: Kathryn Shaw
Author-Person: psh162
Note: LS
Number: 3985
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3985
File-URL: http://www.nber.org/papers/w3985.pdf
File-Format: application/pdf
Publication-Status: published as Montgomery, Edward and Kathryn Shaw. "Pensions And Wage Premia," Economic Inquiry, 1997, v35(3,Jul), 510-522.
Abstract: In this paper we use that the theory of compensating differentials to identify sources of heterogeneity in firms' costs of providing fringe benefits and hence heterogeneity in the magnitude of the compensating differential. We estimate the relationship between pensions and wages controlling for variations in the size of the compensating differential related to firm size or the presence of a union. Both firm size and unionism are commonly associated with the payment of wage premia and/or the presence of market power where the costs of fringe benefits to the firm may be less. Our results are consistent with these a priori expectations and suggest that the magnitude of the compensating differential is significantly higher in nonunion and in small firms.
Handle: RePEc:nbr:nberwo:3985
Template-Type: ReDIF-Paper 1.0
Title: Transitional Dynamics in Two-Sector Models of Endogenous Growth
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 3986
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3986
File-URL: http://www.nber.org/papers/w3986.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal of Economics, vol cviii, issue 3, August 1993, (MIT Press, Cambridge), p. 739
Abstract: The steady state and transitional dynamics of two-sector models of endogenous growth are analyzed in this paper. We describe necessary conditions for endogenous growth. The conditions allow us to reduce the dynamics of the solution to a system with one state-like and two control-like variables. We analyze the determinants of the long run growth rate. We use the Time-Elimination Method to analyze the transitional dynamics of the models. We find that there are transitions in real time if the point-in-time production possibility frontier is strictly concave, which occurs, for example, if the two production functions are different or if there are decreasing point-in-time returns in any of the sectors. We also show that if the models have a transition in real time, the models are globally saddle path stable. We find that the wealth or consumption smoothing effect tends to dominate the substitution or real wage effect so that the transition from relatively low levels of physical capital is carried over through high work effort rather than high savings. We develop some empirical implications. We show that the models predict conditional convergence in that, in a cross section, the growth rate is predicted to be negatively related to initial income but only after some measure of human capital is held constant. Thus, the models are consistent with existing empirical cross country evidence.
Handle: RePEc:nbr:nberwo:3986
Template-Type: ReDIF-Paper 1.0
Title: The Consequences and Costs of Maternal Substance Abuse in New York City
Author-Name: Theodore Joyce
Author-Person: pjo112
Author-Name: Andrew D. Racine
Author-Name: Naci Mocan
Author-Person: pmo270
Note: EH
Number: 3987
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3987
File-URL: http://www.nber.org/papers/w3987.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, Vol. 11, pp. 297-314 (1992).
Abstract: We use a pooled time-series cross-section of live births in New York City between 1980 and 1989 to investigate the dramatic rise in low birthweight, especially among Blacks, that occurred in the mid 1980s. After controlling for other risk factors, we estimate that the number of excess low birthweight births attributable to illicit substance abuse over this period ranged from approximately 1,900 to 3,800 resulting in excess neonatal admission costs of between $22 and $53 million. We conclude that illicit substance use was a major contributory factor in rapid rise of low birthweight among Blacks in New York City in the latter part of the 1980s. The impact of prenatal illicit substance use on Whites and Hispanics is less conclusive.
Handle: RePEc:nbr:nberwo:3987
Template-Type: ReDIF-Paper 1.0
Title: Forward Into the Past: Productivity Retrogression in the Electric Generating Industry
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: PR
Number: 3988
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3988
File-URL: http://www.nber.org/papers/w3988.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. (ed.) Productivity growth, inflation, and unemployment: The collected essays of Robert J. Gordon. Cambridge; New York and Melbourne: Cambridge University Press, 2004.
Abstract: The electric utility industry is a prime culprit in the U.S. productivity growth slowdown of the last Iwo decades. This paper develops econometric labor and fuel demand equations for a large panel data set covering almost all fossil-fueled electric generating capacity over the period 1948-87. Labor productivity and fuel efficiency both advanced rapidly until the late 1960s and then both reversed direction, deteriorating substantially, particularly for newly constructed plants. The research goes beyond econometric estimation by conducting a set of telephone interviews with plant managers of establishments that registered particularly high or low productivity. The interviews reveal many variables and relations that are omitted in conventional econometric studies of production. They support the view that the productivity reversal originated in the manufacturing industry that produces electric generating equipment; after decades of increased scale, temperature, and pressure, a 'technological frontier" was reached in which new large plants developed unanticipated maintenance problems requiring substantial additions of maintenance employees. Environmental regulations also contributed to the productivity reversal but were secondary in importance to the technological barriers. Overall, the study supports the "depletion hypothesis" previously advanced to explain the productivity slowdown.
Handle: RePEc:nbr:nberwo:3988
Template-Type: ReDIF-Paper 1.0
Title: Intertemporal Asset Pricing Without Consumption Data
Author-Name: John Y. Campbell
Author-Person: pca54
Note: AP EFG
Number: 3989
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3989
File-URL: http://www.nber.org/papers/w3989.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol 83, June 1993, p. 487-512
Abstract: This paper proposes a new way to generalize the insights of static asset pricing theory to a multi-period setting. The paper uses a loglinear approximation to the budget constraint to substitute out consumption from a standard intertemporal asset pricing model. In a homoskedastic lognormal selling, the consumption-wealth ratio is shown to depend on the elasticity of intertemporal substitution in consumption, while asset risk premia are determined by the coefficient of relative risk aversion. Risk premia are related to the covariances of asset returns with the market return and with news about the discounted value of all future market returns.
Handle: RePEc:nbr:nberwo:3989
Template-Type: ReDIF-Paper 1.0
Title: The Cowles Commission Approach, Real Business Cycle Theories, and New Keynesian Economics
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG
Number: 3990
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3990
File-URL: http://www.nber.org/papers/w3990.pdf
File-Format: application/pdf
Publication-Status: published as The Business Cycles: Theories and Evidence, (Proceedings of the Sixteenth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis), edited by Michael T. Belognia and Michelle R. Garfinkel, pp. 133-147, Norwell, MA: Kluwer Academic Publishers, 1992
Abstract: The Cowles Commission approach is reviewed and compared to the approaches of real business cycle (RBC) theorists and new Keynesian economists. It is argued that RBC models are not tested in a serious enough way and that the new Keynesian literature is not empirical enough for testing even to be a serious possibility. Macroeconomics seems to be moving away from its traditional empirical basis, which is sad. This paper argues for returning to the path that was abandoned by most macroeconomists around 1970, namely the specification and testing of structural macroeconometric models.
Handle: RePEc:nbr:nberwo:3990
Template-Type: ReDIF-Paper 1.0
Title: Wage Effects of A U.S. - Mexican Free Trade Agreement
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI IFM
Number: 3991
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3991
File-URL: http://www.nber.org/papers/w3991.pdf
File-Format: application/pdf
Publication-Status: published as Peter Garber, ed., The Mexican-U.S. Free Trade Agreement, (Cambridge: MIT Press: 1994), p. 57-128.
Abstract: This paper analyzes the extent to which education will be subsidized when the subsidy rate is determined by majority voting. The analysis takes place in a framework where education is a discrete decision and all individuals would like to obtain an education because of its effect on future earnings. Individuals differ in their initial income levels. Mexico doesn't seem economically large enough now to have a significant effect on the prices of goods and the earnings of labor in the United States, but Mexican population growth and productivity gains induced by liberalization will make the Mexico of the future much larger than today, especially in those sectors that use intensively Mexico's abundant low-skilled labor. Furthermore, in a free trade agreement with the United States, Mexico has an incentive to concentrate production on those sectors that are most protected by the U.S, from third-country competition, and to export all that product to the high-priced protected U.S. market. For all these reasons, the Mexico of the future is large enough to undo current or future U.S. protection designed to maintain wages of low-skilled workers. With or without a free trade agreement. the United States faces a substantial problem with the continuing economic deterioration of the lowest skilled workers. A free trade agreement with Mexico would keep the U.S. from using protectionism to deal with this problem.
Handle: RePEc:nbr:nberwo:3991
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games Under Uncertainty
Author-Name: Olivier Jean Blanchard
Author-Person: pbl2
Author-Name: Philippe Weil
Author-Person: pwe97
Note: AP EFG
Number: 3992
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3992
File-URL: http://www.nber.org/papers/w3992.pdf
File-Format: application/pdf
Publication-Status: published as Advances in Macroeconomics (2001), vol. 1, issue 2, article 3, http://www.bepress.com/bejm/advances/vol1/iss2/art3.
Publication-Status: published as Olivier Blanchard & Philippe Weil, 2001. "Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 0(2), pages 3.
Abstract: Can governments roll their debt over forever in dynamically efficient economies, and thus avoid the need to raise taxes? While the answer is a clear no under certainty, it depends, under uncertainty, on whether public debt provides intergenerational insurance. When it does not, rollover is not possible, even if the rate of return on one-period bonds is below the growth rate. When it does, debt rollover may be possible, even if the return on one-period bonds is above the growth rate.
Handle: RePEc:nbr:nberwo:3992
Template-Type: ReDIF-Paper 1.0
Title: Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Author-Name: Rebecca Henderson
Note: PR
Number: 3993
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3993
File-URL: http://www.nber.org/papers/w3993.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal of Economics, vol cviii. August 1993, issue 3 (MIT Press, Cambridge), p. 577
Abstract: We compare the geographic location of patent citations to those of the cited patents, as evidence of the extent to which knowledge spillovers are geographically localized. We find that citations to U.S. patents are more likely to come from the U.S., and more likely to come from the same state and SMSA as the cited patents than one would expect based only on the preexisting concentration of related research activity. These effects are particularly significant at the local (SMSA) level, and are particularly apparent in early citations.
Handle: RePEc:nbr:nberwo:3993
Template-Type: ReDIF-Paper 1.0
Title: Human Capital Accumulation and Income Distribution
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Richard Rogerson
Author-Person: pro53
Number: 3994
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3994
File-URL: http://www.nber.org/papers/w3994.pdf
File-Format: application/pdf
Publication-Status: published as "On the Political Economy of Education Subsidies", Review of Economic Studies, vol. 62, pp. 249-262, April 1995.
Abstract: The non-existence of credit markets implies that initial income is a determinant of who actually obtains an education. We consider the outcome of a process in which income is taxed to provide subsidies for education. and taxes are chosen by majority voting. We characterize the outcome as a function of both the level and the distribution of income in the economy. In particular we derive conditions under which middle income individuals ally themselves with upper income individuals at the expense of lower income individuals, and vice versa. The analysis determines the relationship between human capital accumulation and distribution of income.
Handle: RePEc:nbr:nberwo:3994
Template-Type: ReDIF-Paper 1.0
Title: Why Does the Stock Market Fluctuate?
Author-Name: Robert B. Barsky
Author-Person: pba670
Author-Name: J. Bradford De Long
Note: AP
Number: 3995
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3995
File-URL: http://www.nber.org/papers/w3995.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 108, no. 2 (1993): 291-311.
Abstract: Large long-run swings in the United States stock market over the past century correspond to swings in estimates of fundamental values calculated by using a long moving average of past dividend growth to forecast future growth rates. Such a procedure would have been reasonable if investors were uncertain of the structure of the economy. and had to make forecasts of unknown and possibly-changing long-run dividend growth rates. The parameters of the stochastic process followed by dividends over the twentieth century cannot be precisely estimated even today at the century's end. Investors in the past had even less information about the dividend process. In such a context, it is difficult to see how investors can be faulted for implicitly forecasting future dividends by extrapolating past dividend growth.
Handle: RePEc:nbr:nberwo:3995
Template-Type: ReDIF-Paper 1.0
Title: Local Versus Global Convergence Across National Economies
Author-Name: Steven N. Durlauf
Author-Person: pdu117
Author-Name: Paul A. Johnson
Author-Person: pjo5
Note: EFG
Number: 3996
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3996
File-URL: http://www.nber.org/papers/w3996.pdf
File-Format: application/pdf
Abstract: This paper reexamines the ability of the Solow-type growth models to explain the pattern of cross-country growth rates. Recent authors, most notably Mankiw, Romer and Weil [1990], have argued that differences in national growth rates are compatible with the view that each country has access to a common, neoclassical aggregate production function. Such models imply that, conditional on population growth and savings rates, disparate economies are converging over time to the same level of per capita output. We argue that cross-country growth is better explained by a model of local versus global convergence. Countries converge locally in the sense that economies with similar initial conditions tend to converge to one another. However, we find little evidence of convergence across economies with substantially different initial conditions as measured by per capita output or literacy rates. Further, the impact of capital formation on aggregate output increases with the level of economic development. These results are consistent with models of multiple equilibria in long run behavior. Our results suggest that the Solow growth model should be supplemented with a theory of aggregate production function differences in order to fully explain international growth patterns.
Handle: RePEc:nbr:nberwo:3996
Template-Type: ReDIF-Paper 1.0
Title: The Effect of the Minimum Wage on the Fast Food Industry
Author-Name: Lawrence F. Katz
Author-Person: pka266
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 3997
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3997
File-URL: http://www.nber.org/papers/w3997.pdf
File-Format: application/pdf
Publication-Status: published as Lawrence F. Katz & Alan B. Krueger, 1992. "The effect of the minimum wage on the fast-food industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
Abstract: Using data from a longitudinal survey of fast food restaurants in Texas, the authors examine the impact of recent changes in the federal minimum wage on a low-wage labor market The authors draw four main conclusions. First, the survey results indicate that less than 5 percent of fast food restaurants use the new youth subminimum wage even though the vast majority paid a starting wage below the new hourly minimum wage immediately before the new minimum went into effect. Second, although some restaurants increased wages by an amount exceeding that necessary to comply with higher minimum wages in both 1990 and 1991, recent increases in the federal minimum wage have greatly compressed the distribution of starting wages in the Texas fast food industry. Third, employment increased relatively in those firms likely to have been most affected by the 1991 minimum wage increase. Fourth, changes in the prices of meals appear to be unrelated to mandated wage changes. These employment and price changes do not seem consistent with conventional views of the effects of increases in a binding minimum wage.
Handle: RePEc:nbr:nberwo:3997
Template-Type: ReDIF-Paper 1.0
Title: Privatization in East Germany
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Number: 3998
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3998
File-URL: http://www.nber.org/papers/w3998.pdf
File-Format: application/pdf
Publication-Status: published as Public Finance, 47, (supp.), 1992, pp. 152-171 ("Public Finance in a World of Transition") supplement
Publication-Status: published as Sinn, Hans-Werner, 1992. "Privatization in East Germany," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 152-71.
Abstract: This paper is a critical review of east German privatization policy. It is argued that the restitution of old property rights has been a major obstacle to investment and that the attempt to sell two thirds of an economy in the market place is bound to be a failure. Such an attempt implies serious macro and microeconomic stock-flow problems which erode the sales prices of Treuhand assets, induce the Treuhand to slow down its sales, and reduce private investment. By combining a participation model with a wage freeze the paper designs a social contract that may help increase the chances of economic recovery in east Germany.
Handle: RePEc:nbr:nberwo:3998
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Inequality: A Time-Exposure Perspective
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 3999
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w3999
File-URL: http://www.nber.org/papers/w3999.pdf
File-Format: application/pdf
Publication-Status: published as Tax Policy and the Economy J. Poterba ed., Vol. 6, MIT Press 1992
Publication-Status: published as Taxation and Inequality: A Time-Exposure Perspective, Joel B. Slemrod. in Tax Policy and the Economy, Volume 6, Poterba. 1992
Abstract: Conclusions about inequality based on cross-sectional snapshots of annual income can give a misleading picture of the inequality of a more permanent notion of income, due to the mobility of individuals across annual income classes. This paper reassesses some of the issues about taxation and inequality using two longitudinal tax return data bases. Replacing annual income with "time-exposure" income, defined as average real income over the period, does not significantly reduce the measured degree of inequality in the 1979-1985 period, although the fraction of income received by the lowest increase substantially. The procedure does, though, reduce the contribution to inequality of certain sources of income such as capital gains and increase the contribution of other sources such as interest and dividends. There is no systematic evidence that the comparison of snapshots between the 1967-1973 and 1979-1985 periods overstates the growth in inequality of a more permanent notion of income. The inequality of pre-tax income has been increasing steadily in the past two decades. Changes in income taxation have neither stemmed nor contributed significantly to this trend; since 1980 the contribution of the income tax to decreasing inequality has declined slightly.
Handle: RePEc:nbr:nberwo:3999
Template-Type: ReDIF-Paper 1.0
Title: The Flow Approach to Labor Markets
Author-Name: Olivier Jean Blanchard
Author-Person: pbl2
Author-Name: Peter Diamond
Author-Person: pdi24
Note: EFG
Number: 4000
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w4000
File-URL: http://www.nber.org/papers/w4000.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review Papers and Proceedings, May 1992, pp. 354-359
Abstract: The "flow approach" to labor markets builds up from the flows of workers and of jobs. It is based on three essential components, a specification of labor demand in terms of flows of job creation/destruction, a process of matching between workers and firms, and a process of wage determination where wages depend on the labor market prospects of employed workers and firms, We think that this approach gives the right basic picture of unemployment and unemployment dynamics, and of the relation between wage movements and the state of the labor market. The additional richness it naturally delivers also captures important implications of labor market mechanisms for macroeconomics. Finally, its structure is realistic enough to allow for a productive interaction with - and use of - micro-work and micro-evidence in both labor and product markets. This paper shows the structure of the approach and some of its implications. The first section develops a barebone model; the second adds the flesh.
Handle: RePEc:nbr:nberwo:4000
Template-Type: ReDIF-Paper 1.0
Title: Bretton Woods and Its Precursors: Rules Versus Discretion in the History of International Monetary Regimes
Author-Name: Alberto Giovannini
Note: ITI IFM
Number: 4001
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w4001
File-URL: http://www.nber.org/papers/w4001.pdf
File-Format: application/pdf
Publication-Status: published as Retrospective on Bretton Woods System Eds. Michael Bordo and Barry Eichengreen UCP 1993
Publication-Status: published as Bretton Woods and Its Precursors: Rules versus Discretion in the History of International Monetary Regimes, Alberto Giovannini. in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, Bordo and Eichengreen. 1993
Abstract: In recent years, the theory of rules and discretion in monetary policy has fascinated scores of academic economists and policymakers alike. This paper asks whether it can be applied to understand the history of the world monetary system, by focusing on the setup and the experience of the Bretton Woods regime, and comparing it with its predecessors, in particular the classical gold standard. The paper first discusses the underpinnings, and some of the problems, of a theory of the evolution of the international monetary regime based on alternating rules and discretion. It then assesses the ability of such theories to explain the historical record. It first reviews the rules that characterized the classical gold standard, and the motivations to return to gold in the interwar period. Then it evaluates the British and US plan for world monetary reform published in 1943, and the IMF Articles of Agreement. Finally, the paper analyzes the data on interest rates and exchange rates during the classical gold standard and the Bretton Woods period to assess the stabilizing properties of the two exchange-rate regimes.
Handle: RePEc:nbr:nberwo:4001
Template-Type: ReDIF-Paper 1.0
Title: Self-Selection and Internal Migration in the United States
Author-Name: George J. Borjas
Author-Person: pbo44
Author-Name: Stephen G. Bronars
Author-Person: pbr432
Author-Name: Stephen J. Trejo
Author-Person: ptr78
Note: LS
Number: 4002
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w4002
File-URL: http://www.nber.org/papers/w4002.pdf
File-Format: application/pdf
Publication-Status: published as Borjas, George J., "The Earnings of Male Hispanic Immigrants in the United States," Industrial and Labor Relations Review, Vol. 35, no. 3 (April 1982): 343-353.
Publication-Status: published as Borjas, George J., "The Earnings of State Government Employees in the United States", Journal of Urban Economics, Vol. 19, no. 2 (March 1986): 156-173.
Publication-Status: published as Journal of Urban Economics, Vol 32, no. 2 (September 1992): 159-185.
Publication-Status: published as Borjas, George., "The Earnings of Mexican Immigrants in the United States", Journal of Development Economics, Vol. 51, no. 1 (October 1996): 69-98.
Abstract: Within the conceptual framework of the Roy model, this paper provides an empirical analysis of internal migration flows using data from the National Longitudinal Surveys of Youth. The theoretical approach highlights regional differences in the returns to skills: regions that pay higher returns to skills attract more skilled workers than regions that pay lower returns. Our empirical results suggest that interstate differences in the returns to skills are a major determinant of both the size and skill composition of internal migration flows. Persons whose skills are most mismatched with the reward structure offered by their current state of residence are the persons most likely to leave that state. and these persons tend to relocate in states which offer higher rewards for their particular skills.
Handle: RePEc:nbr:nberwo:4002
Template-Type: ReDIF-Paper 1.0
Title: Peso Problems and Heterogeneous Trading: Evidence From Excess Returns in Foreign Exchange and Euromarkets
Author-Name: Martin D. Evans
Author-Person: pev5
Author-Name: Karen K. Lewis
Author-Person: ple1119
Note: AP ITI IFM
Number: 4003
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w4003
File-URL: http://www.nber.org/papers/w4003.pdf
File-Format: application/pdf
Publication-Status: published as "Do Long Term Savings in the Dollar Affect Estimates of the Risk Premium?" Review of Financial Studies, 1995, September, vol.8, pp.709-742.
Abstract: Theoretical and empirical studies have treated excess returns as processes with time-varying but temporary disturbances. By contrast, empirical evidence indicates that the behavior of asset price levels can be well-approximated by processes with some permanent disturbances. These two observations restrict the relationship between the levels of asset prices and the excess returns they generate. In this paper, we begin by testing these restrictions for foreign exchange and bond returns. Surprisingly, we reject these restrictions for some returns, implying that excess returns contain some permanent shocks. We then evaluate the possible reasons for these results. This behavior appears inconsistent with conventional models of the risk premia. On the other hand, this behavior could arise from the presence of some traders in the market who have "regressive expectations" or from anticipated shifts in the distribution of asset prices inducing a "peso problem". We test and reject a simple model implied by a steady-state presence of traders with regressive expectations. However, we cannot distinguish between a model where the effects of these traders vary over time or where a peso problem exists or both.
Handle: RePEc:nbr:nberwo:4003
Template-Type: ReDIF-Paper 1.0
Title: Asset Bubbles and Endogenous Growth
Author-Name: Noriyuki Yanagawa
Author-Name: Gene M. Grossman
Author-Person: pgr21
Note: EFG
Number: 4004
Creation-Date: 1992-02
Order-URL: http://www.nber.org/papers/w4004
File-URL: http://www.nber.org/papers/w4004.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, vol 31, 1993, pp. 3-19
Abstract: We study the interaction between productive and nonproductive savings in an economy that grows in the long run due to endogenous improvements in labor productivity. As in the neoclassical growth setting with overlapping generations studied by Tirole (1985), asset bubbles can exist in an economy with endogenous growth provided they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate. Since the growth rate in the bubble-less equilibrium is endogenous, the existence condition reflects parameters of tastes and technology. We find that bubbles, when they exist, retard the growth of the economy, perhaps even in the long run, and reduce the welfare of all generations born after the bubble appears.
Handle: RePEc:nbr:nberwo:4004
Template-Type: ReDIF-Paper 1.0
Title: Business Cycle Durations and Postwar Stabilization of the U.S. Economy
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 4005
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4005
File-URL: http://www.nber.org/papers/w4005.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, March 1994
Abstract: The average length of business cycle contractions in the United States fell from 20.5 months in the prewar period to 10.7 months in the postwar period. Similarly, the average length of business cycle expansions rose from 25.3 months in the prewar period to 49.9 months in the postwar period. This paper investigates three explanations for this apparent duration stabilization. The first explanation is that shocks to the economy have been smaller in the postwar period. This implies that duration stabilization should be present in both aggregate and sectoral output data. The second explanation is that the composition of output has shifted from sectors that are very cyclical, like manufacturing, to sectors that are less cyclical, like services. This would lead to increased stability in aggregate output even in the absence of increased stability in the individual sectors. The third explanation is that the apparent stabilization is largely spurious, and is caused by differences in the way that prewar and postwar business cycle reference dates were chosen by the NBER. The evidence presented in this paper favors this third explanation.
Handle: RePEc:nbr:nberwo:4005
Template-Type: ReDIF-Paper 1.0
Title: Inflation and Poverty
Author-Name: Eliana Cardoso
Note: ITI IFM
Number: 4006
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4006
File-URL: http://www.nber.org/papers/w4006.pdf
File-Format: application/pdf
Abstract: This paper discusses the regressive nature of the inflation tax and she limited extent of its impact on those individuals below the poverty line. It also argues that inflation affects poverty mainly through its impact on real wages: the empirical evidence shows that wages increase more slowly than prices during episodes of rising inflation in Latin America. Finally the paper discusses whether some stabilization programs are less costly in terms of increased poverty than others. Both orthodox programs and attempts to reduce inflation by the implementation of incomes policy have not helped the poor in Latin America.
Handle: RePEc:nbr:nberwo:4006
Template-Type: ReDIF-Paper 1.0
Title: Debt Reduction, Adjustment Lending, and Burden Sharing
Author-Name: Ishac Diwan
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI IFM
Number: 4007
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4007
File-URL: http://www.nber.org/papers/w4007.pdf
File-Format: application/pdf
Publication-Status: published as External Debt Adjustment and Burden Sharing: A Unified Framework, Princeton Studies in International Finance, 1992
Abstract: We argue that the disincentive effect of a debt overhang is generally small and consequently that debt reduction does not lead to important efficiency gains on this account. Instead, we develop a framework that highlights the inefficiency created by the liquidity constraint faced by over-indebted countries. Often, adjustment/investment opportunities that are profitable at the world interest rate cannot be undertaken for lack of sufficient funds. New creditors are deterred from investing as they expect to be 'taxed" by the old creditors who stand to gain disproportionately. This leads to an inefficient situation when a class of new creditors have a comparative advantage relative to the old creditors. We focus on the time inconsistency introduced by the shortage of liquidity. New (unconditional) loans will be consumed rather than invested. In this context conditional lending can release the liquidity constraint in a time consistent way and lead to efficiency gains that can be shared between the debtor, the old creditors, and the new creditors. The role of debt reduction then is to create the "headroom" needed for these new and more efficient creditors to step in
Handle: RePEc:nbr:nberwo:4007
Template-Type: ReDIF-Paper 1.0
Title: Do Taxes Matter? Lessons From the 1980s
Author-Name: Joel Slemrod
Author-Person: psl10
Note: PE
Number: 4008
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4008
File-URL: http://www.nber.org/papers/w4008.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Volume 82, Number 2, pp. 250-6, May 1992
Abstract: The response of the economy to two major -- although in important respects offsetting -- tax reforms has been much smaller than ardent supply-side revolutionaries expected, thus suggesting that a reassessment of the grounds for revolt is in order. This paper offers such a reassessment by first discussing how the evidence from the tax reforms of 1981 and 1986 reflects on our understanding of the response to taxation -- with particular reference to savings and capital gains realizations. I then reconstruct a 1992 view about how taxes affect behavior. A unifying theme is that the tax system does much more than alter the relative prices of real variables -- it also provides incentives to misreport income, restructure financial claims, time transactions, change the legal form of organization, and so on. For this reason, observed low tax elasticities of real variables may be due to either low elasticities of substitution or the fact that tax policy changes opportunity sets in complex ways. Disentangling these explanations requires an emphasis on the transaction-based nature of the tax system and the administration and enforcement of tax laws.
Handle: RePEc:nbr:nberwo:4008
Template-Type: ReDIF-Paper 1.0
Title: Auditing the Producer Price Index: Micro Evidence From Prescription Pharmaceutical Preparations
Author-Name: Ernst R. Berndt
Author-Name: Zvi Griliches
Author-Name: Joshua G. Rosett
Note: PR
Number: 4009
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4009
File-URL: http://www.nber.org/papers/w4009.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Business and Economic Statistics, vol. 11 no. 3, July 1993, pp. 251-264
Abstract: In this paper we focus on a mystery we uncovered while undertaking a detailed audit of the US Bureau of Labor Statistics producer price index (PPl). We summarize our puzzle as follows. From January 1984 through December 1989.the BLS price Index for SIC 28341 (prescription pharmaceutical preparations) grew at an annual rate of 9.09%. For purposes of comparison, we have obtained monthly price and quantity sales data on all prescription pharmaceutical preparation products sold by four major US pharmaceutical manufacturers, accounting for about 24% of total industry domestic sales in 1989. Using Laspeyres price index construction procedures on these data that mimic BLS methods, we find that over the same time period. the four-company price index increased at only 6.68% per year. Finally. when we employ a Divisia price index procedure with smoothed weights that incorporates new goods immediately, the aggregate price index for these four firms grows at a rate of only 6.03% per year. Why is it that the official BLS price index grows approximately 50% more rapidly (9.09% vs. 6.03%)than the Divisia price index? That mystery is the focal point of our paper.
Handle: RePEc:nbr:nberwo:4009
Template-Type: ReDIF-Paper 1.0
Title: High-Tech Capital Formation and Labor Composition in U.S. Manufacturing Industries: An Exploratory Analysis
Author-Name: Ernst R. Berndt
Author-Name: Catherine J. Morrison
Author-Name: Larry S. Rosenblum
Note: PR
Number: 4010
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4010
File-URL: http://www.nber.org/papers/w4010.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, vol. 65, no. 1, pp. 9-43, (1994) Annals of Econometrics
Abstract: In this paper we report results of an exploratory empirical effort examining relationships between investments in high-tech information technology capital and the distribution of employment, both by occupation and by level of educational attainment. Our data cover the two-digit U.S. manufacturing industries. annually, 1968-86. We find that increases in the high-tech composition of capital (OF/K) are positively related to growth in white collar. non-production worker hours, and that increases in white collar hours account for most of the reduction in aggregate labor productivity associated with increases in high-tech capital. In terms of educational attainment, within the blue collar occupations we find clear evidence in support of skill upgrading toward more educated workers occurring along with increases in OF/K. While point estimates are not very precise, among white collar occupations we find that hours provided by the least and most educated workers increase with OF/K, while hours provided by those with high-school and some college education are adversely affected.
Handle: RePEc:nbr:nberwo:4010
Template-Type: ReDIF-Paper 1.0
Title: The Growth and Welfare Consequences of Differential Tariffs With Endogenously-Supplied Capital and Labor
Author-Name: Philip L. Brock
Author-Name: Stephen J. Turnovsky
Author-Person: ptu5
Note: ITI IFM
Number: 4011
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4011
File-URL: http://www.nber.org/papers/w4011.pdf
File-Format: application/pdf
Publication-Status: published as Brock, Philip L. and Stephen J. Turnovsky. "The Growth And Welfare Consequences Of Differential Tariffs," International Economic Review, 1993, v34(4), 765-794.
Abstract: This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects. highlighting the cost of the intertemporal distortions produced by protective trade policies. Several specific welfare propositions are obtained. First, tariff protection is shown to create short-run benefits but long-run costs in welfare. Secondly, the second-best policy for the two tariffs is characterized. Finally, several propositions summarizing the implications of our analysis for tariff reform are derived.
Handle: RePEc:nbr:nberwo:4011
Template-Type: ReDIF-Paper 1.0
Title: Suit Versus Settlement When Parties Seek Nonmonetary Judgements
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 4012
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4012
File-URL: http://www.nber.org/papers/w4012.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Legal Studies, January 1993, Vol. 22, No. 1, 1-13.
Abstract: This article considers situations in which plaintiffs seek nonmonetary judgments, for instance, custody of a child or an injunction. The primary questions of interest concern when parties will be likely to settle and, if so, what the nature of their settlements will be. The answers to these questions are different from what they are when plaintiffs seek purely monetary awards. In that case settlements involve only money payments whereas here they involve as well disposition of the nonmonetary things sought (who obtains custody of a child). Also, as is well known, when plaintiffs seek monetary judgments the parties will be inclined to settle to save litigation costs and reduce risk if they agree about the likelihood of plaintiff success at trial, but here that is not necessarily true. (For example, custody of a child may well be considered vital by each parent, making each unwilling to relinquish the chance of securing custody through trial for any amount in the range of what the other could pay.)
Handle: RePEc:nbr:nberwo:4012
Template-Type: ReDIF-Paper 1.0
Title: Detection of Bid Rigging in Procurement Auctions
Author-Name: Robert H. Porter
Author-Person: ppo97
Author-Name: J. Douglas Zona
Note: IO
Number: 4013
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4013
File-URL: http://www.nber.org/papers/w4013.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, June 1993, vol. 101, no. 3 p. 518-538
Abstract: This paper examines bidding in auctions for state highway construction contracts on Long Island in the early 1980s, in order to determine whether bid rigging occurred. Detection of collusion is possible because of limited participation in the collusive scheme. The paper looks at differences in behavior between ring members and non-members. In these auctions, collusio did not take the form of a bid rotation scheme, in which only one ring member submits a bid. Instead, several ring members bid on most jobs. The apparent role of ring meetings prior to the auction was to designate a serious bidder, and its bid, and the other firms then frequently submitted phony higher bids. The bidding data indicate that the bids of non-cartel firms, as well as their rank distribution, were related to cost measures, such as how much backlog a firm was carrying. In contrast, the rank distribution of higher cartel bids was unrelated to similar cost measures, and differed from the distribution of the low cartel bid.
Handle: RePEc:nbr:nberwo:4013
Template-Type: ReDIF-Paper 1.0
Title: A Procedure for Predicting Recessions With Leading Indicators: Econometric Issues and Recent Experience
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG
Number: 4014
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4014
File-URL: http://www.nber.org/papers/w4014.pdf
File-Format: application/pdf
Publication-Status: published as Business Cycles, Indicators and Forecasting, eds. James H. Stock and Mark W . Watson, Studies in Business Cycles, No. 28, Chicago: University of Chicago Press, 1993
Publication-Status: published as A Procedure for Predicting Recessions with Leading Indicators: Econometric Issues and Recent Experience, James H. Stock, Mark W. Watson. in Business Cycles, Indicators, and Forecasting, Stock and Watson. 1993
Abstract: This paper examines the forecasting performance of various leading economic indicators and composite indexes since 1988. in particular during the onset of the 1990 recession. The primary focus is on an experimental recession index (tile "XRI"). a composite index which provides probabilistic forecasts of whether the U.S. economy will be in a recession six months hence. After detailing its construction, the paper examines the out-of-sample performance of the XRI and a related forecast of overall economic growth. the experimental leading index (XLI). These indexes performed well from 1988 through the summer of 1990 - for example. in June 1990 the XLI model forecasted a .4% (annual rate) decline in the experimental coincident index from June through September. when in fact the decline was only slightly greater,.8%. However. the XLI failed to forecast the sharp declines of October and November 1990. After exploring several possible explanations. we conclude that one important source of the forecast error was the use of financial variables during a recession that was not associated with a particularly tight monetary policy. Financial indicators -- and the experimental index -- were not alone. however. in failing to forecast the 1990 recession, An examination of 45 economic indicators shows that almost all failed to forecast the 1990downturn. and the few that did provided unclear signals before the recessions of the 19705 and 1980s.
Handle: RePEc:nbr:nberwo:4014
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance
Author-Name: Anil K. Kashyap
Author-Person: pka35
Author-Name: Jeremy C. Stein
Author-Person: pst43
Author-Name: David W. Wilcox
Author-Person: pwi165
Note: ME
Number: 4015
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4015
File-URL: http://www.nber.org/papers/w4015.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Volume 83, Issue 1, 1993, p. 78-98
Abstract: In this paper we use the relative movements in bank loans and commercial paper to provide evidence on the existence of a loan supply channel of monetary policy transmission. A first necessary condition for monetary policy to work through a lending channel is that banks must view loans and securities as imperfect substitutes, so that monetary tightening does affect the availability of bank loans. We find that tighter monetary policy leads to a shift in firms' mix of external financing -- commercial paper issuance rises while bank loans fall, suggesting that loan supply has indeed been reduced. Furthermore, these shifts in the financing mix seem to affect investment (even controlling for interest rates). This implies that bank and non-bank sources of finance are also not perfect substitutes for businesses. We also argue that this view of the transmission mechanism can help explain why interest rate spreads involving commercial paper rates have had considerable predictive power for many measures of economic activity.
Handle: RePEc:nbr:nberwo:4015
Template-Type: ReDIF-Paper 1.0
Title: The European Central Bank: A Bank or a Monetary Policy Rule
Author-Name: David Folkerts-Landau
Author-Name: Peter M. Garber
Author-Person: pga124
Note: IFM
Number: 4016
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4016
File-URL: http://www.nber.org/papers/w4016.pdf
File-Format: application/pdf
Abstract: A European central banking institution will be an essential feature of the final stage of the European Economic and Monetary Union. The EC Committee of Central Bank Governors has recently produced a Draft Statute of the European System of Central Banks and of the European Central Bank. The draft Statute mandates the maintenance of price stability as the explicit primary objective of the ECB. and the necessary monetary functions and operations of the system are defined in accordance with standard practice. The maintenance of a stable financial and payments system, however. is not an explicit objective of the ECB. and only limited banking functions are admitted as one of the system's tasks. The draft Statute clearly subscribes to a "narrow" concept of the System of Central Banks with a single objective-monetary stability-rather than a "broad" concept with the additional objective of financial-market stability. In this paper we examine the consequences of a "narrow" central banking system for Community financial markets, We conclude that in the absence of such banking functions it will be necessary to slow or even prevent the ongoing development of Community-wide liquid. securitized financial markets, supported by a large-volume wholesale payments system. Instead, the historically prevalent bank-intermediated financial system will have to be maintained to lower the likelihood of liquidity crises that demand central bank intervention.
Handle: RePEc:nbr:nberwo:4016
Template-Type: ReDIF-Paper 1.0
Title: The Private ECU: A Currency Floating on Gossamer Wings
Author-Name: David Folkerts-Landau
Author-Name: Peter M. Garber
Author-Person: pga124
Note: IFM
Number: 4017
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4017
File-URL: http://www.nber.org/papers/w4017.pdf
File-Format: application/pdf
Abstract: Today's value of the private ECU is driven by expectations that a European monetary authority will at some future date declare itself willing to convert the private ECU into the official basket at par. Until then, its value is not limited by any existing institutional arrangements in the European Communities, such as the Exchange Rate Mechanism of the European Monetary System. We address the question of what determines the exchange rate between the private ECU and the official Basket, and what determines ECU interest rates. The Bank for International Settlements sets the ECU overnight interest rate on clearing balances as a weighted and lagged average of the money-market rates in the EC currencies, thereby fixing a point on the ECU term-structure. This exogenous fixing of the ECU interest rate and the expectation of a future fixing of the exchange rate satisfy the fundamental requirements for a obtaining a determinate real value of what is otherwise an undefined private ECU unit of account.
Handle: RePEc:nbr:nberwo:4017
Template-Type: ReDIF-Paper 1.0
Title: Inflation Expectations and the Structural Shift in Aggregate Labor-Cost Determination in the 1980s
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Note: LS
Number: 4018
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4018
File-URL: http://www.nber.org/papers/w4018.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David & Leonard, Jonathan S. "Inflation Expectations and the Structural Shift in Aggregate Labor-Cost Determination in the 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 786-800, November 1993.
Abstract: Aggregate labor cost equations tended to overpredict labor-cost inflation in the United States in the 1980s. We consider the hypothesis that a change in the price-inflation-expectations mechanism can explain this apparent structural shift in the 1980s. We examine whether the sharp recession of the early 1980s and continued tight monetary policy throughout the decade may have led to changes in the relationship between past price inflation and expected price inflation such that distributed lags of price inflation persistently overestimated expected price inflation, and hence led to overprediction of labor-cost inflation by standard Phillips curves in this period. The evidence leads us to reject this hypothesis, and to conclude instead that there was a true structural shift in labor cost determination.
Handle: RePEc:nbr:nberwo:4018
Template-Type: ReDIF-Paper 1.0
Title: Sources of Bias in Women's Wage Equations: Results Using Sibling Data
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Sanders Korenman
Note: LS
Number: 4019
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4019
File-URL: http://www.nber.org/papers/w4019.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Spring 1994, Volume 39 (2): 379-405.
Abstract: We use data on sisters to jointly address heterogeneity bias and endogeneity bias in estimates of wage equations for women. This analysis yields evidence of biases in OLS estimates of wage equations for white and black women, some of which are detected only when these two sources of bias are addressed simultaneously. For both white and black women there is evidence of upward bias in the estimated returns to schooling. Bias-corrected estimates of the effect of marriage on wages, for white women, suggest a positive marriage premium. We also use the sibling data to identify our models, and test a number of other commonly used identifying assumptions as overidentifying restrictions.
Handle: RePEc:nbr:nberwo:4019
Template-Type: ReDIF-Paper 1.0
Title: Energy Tax Credits and Residential Conservation Investment
Author-Name: Kevin A. Hassett
Author-Person: pha378
Author-Name: Gilbert E. Metcalf
Note: PE
Number: 4020
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4020
File-URL: http://www.nber.org/papers/w4020.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, vol. 57, pp. 201-217, (July 1995).
Abstract: We model the decision to invest in residential energy conservation capital as an irreversible investment in the face of price uncertainty. The irreversible nature of this investment means that there is a value to waiting to invest (an option value) which helps explain the low rate of conservation investment as a result of the residential energy tax credit. Simulations suggest that a tax credit of the type implemented from 1978 through 1985 will not increase conservation investment significantly. We investigate the empirical evidence on the effectiveness of credits using data from a panel data set of roughly 38,000 individual tax returns followed over a three year period from 1979-1981. Unlike previous work, we find that the energy tax credit is statistically significant in explaining the probability of investing. Our estimates suggest that increasing the federal credit by 10 percentage points would increase the percentage of households claiming the credit from 5.7% to 7.1%.
Handle: RePEc:nbr:nberwo:4020
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Tax-Based Saving Incentives on Government Revenue and National Saving
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 4021
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4021
File-URL: http://www.nber.org/papers/w4021.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, May 1995, pp.475-494.
Abstract: This paper shows that previous analyses of IRA-type plans have miscalculated their effect on tax revenue and therefore on national saving by ignoring their impact on corporate tax payments. Recognizing the important effect of IRA plans on corporate tax revenue changes previous conclusions about the revenue effects of IRA plans in fundamental ways. The revenue loss associated with IRAs is either much smaller than has generally been estimated or is actually a revenue gain, depending on the time horizon and key parameter values. In addition to analyzing the effects of traditional tax-deductible IRA plans, the paper presents an alternative nontaxable IRA (in which contributions are not deductible and no subsequent tax is levied on earnings or withdrawals) and shows that, for the most plausible parameter values, the net revenue effect is positive in every year. Although each individual participant eventually withdraws all of his own contributions and accumulated earnings from his IRA account, the net impact on the national capital stock of that individual's participation remains positive even after his death because of the favorable cumulative effects on tax revenue. This is true for traditional deductible IRA plans as well as for the nontaxable IRAs.
Handle: RePEc:nbr:nberwo:4021
Template-Type: ReDIF-Paper 1.0
Title: Learning From the Reagan Deficits
Author-Name: Benjamin M. Friedman
Note: EFG ME
Number: 4022
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4022
File-URL: http://www.nber.org/papers/w4022.pdf
File-Format: application/pdf
Publication-Status: published as The American Economic Review, Vol. 82, No. 2, pp. 299-304, (May 1992).
Abstract: This paper draws six observations from the U.S. fiscal policy actions of the 1980s and their apparent macroeconomic aftermath. in each case focusing on implications for familiar debates about economic behavior: (1) Across-the-board cuts in personal income tax rates reduced the government's tax revenues. (2) Reducing tax revenues did not restrain government spending, at least not by enough to avoid the emergence of historically large deficits. (3) Greater government deficits did not result in greater private saving. (4) Greater deficits did result in -- or at least coincide with -- higher real interest rates. (5) Greater deficits did result in reduced private investment (6) Greater deficits also resulted in lower net foreign investment.
Handle: RePEc:nbr:nberwo:4022
Template-Type: ReDIF-Paper 1.0
Title: Firm-Specific Determinants of the Real Wage
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Sheena McConnell
Note: LS
Number: 4023
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4023
File-URL: http://www.nber.org/papers/w4023.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, May 1992
Abstract: Bargaining models suggest that firm-specific variables play an important role in wage determination. Yet previous empirical studies of wage determination have largely ignored these variables. Our analysis of a large panel data set of U.S. wage contracts suggests that firm-specific variables suggested by bargaining models. such as the values of sales. the capital-labor ratio, and the financial liquidity of the firm. are important determinants of negotiated real wages.
Handle: RePEc:nbr:nberwo:4023
Template-Type: ReDIF-Paper 1.0
Title: Maximizing Seignorage Revenue During Temporary Suspensions of Convertibility: A Note
Author-Name: Michael Bordo
Author-Person: pbo243
Author-Name: Angela Redish
Author-Person: pre9
Note: DAE ME
Number: 4024
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4024
File-URL: http://www.nber.org/papers/w4024.pdf
File-Format: application/pdf
Publication-Status: published as Oxford Economic Papers, , Vol 45., pp. 157-168 (1993)
Abstract: This note extends the theory of the revenue maximizing rate of monetary growth to the case of a temporary suspension of convertibility. It also suggests a methodology for the interpretation of monetary behavior during historical periods of inconvertibility. First we analyze the case of a government with a monopoly over currency issue. The government maximizes seignorage revenue by generating an inflation, but the terminal condition of a return to convertibility implies that the price level must drop at the point of suspension of convertibility, so that there is no discontinuity at the date of resumption. We then consider the behavior of a private banking system whose monetary liabilities are temporarily inconvertible. The model is then used to interpret monetary behaviour during the suspension of convertibility by U.S. banks in 1837/8.
Handle: RePEc:nbr:nberwo:4024
Template-Type: ReDIF-Paper 1.0
Title: A Cross-Sectional Test of a Production-Based Asset Pricing Model
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP
Number: 4025
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4025
File-URL: http://www.nber.org/papers/w4025.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, vol. 104, no. 3, pp. 572-621, 1996.
Abstract: This paper tests a factor pricing model for stock returns. The factors are returns on physical investment, inferred from investment data via a production function. The tests examine the model's ability to explain the variation in expected returns across assets and over time. The model is not rejected. It performs about as well as the CAPM and the Chen, Roll and Ross factor model, and it performs substantially better than a simple consumption-based model. In comparison tests, the investment return factors drive out all the other models. The paper also provides an easy technique for estimating and testing dynamic, conditional asset pricing models. All one has to do is include factors and returns scaled by instruments in an unconditional estimate. This procedure imposes none of the usual restrictions on conditional moments, and does not require prewhitened or orthogonalized factors.
Handle: RePEc:nbr:nberwo:4025
Template-Type: ReDIF-Paper 1.0
Title: The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Engogenous
Author-Name: Tor Jakob Klette
Author-Name: Zvi Griliches
Note: PR
Number: 4026
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4026
File-URL: http://www.nber.org/papers/w4026.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Applied Econometrics, vol. 11, pp. 343-361, 1996.
Abstract: This paper explores the inconsistency of common scale estimators when output is proxied by deflated sales, based on a common output deflator across firms. The problems arise when firms operate in an imperfectly competitive environment and prices differ between firms. In particular, we show that the scale estimates will tend to be downward biased in the production function case, under a wide range of assumptions about the pattern of technology, demand and factor price shocks. The result also holds for scale estimates obtained from cost functions. The empirical part of the paper presents various estimates of scale economies for a sample of Norwegian manufacturing plants. The findings provide some support for the hypothesis that the firms face an imperfectly competitive environment. The estimates suggests that there are significant markups and scale economies to the variable factors of production in our sample. However, the estimates of markups and scale economies presented in this paper are substantially lower than the results obtained by Hall (1988, 1990) and others using industry level data.
Handle: RePEc:nbr:nberwo:4026
Template-Type: ReDIF-Paper 1.0
Title: Training, Wage Growth and Job Performance: Evidence From a Company Database
Author-Name: Ann P. Bartel
Note: LS
Number: 4027
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4027
File-URL: http://www.nber.org/papers/w4027.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, VOlume 13, No. 3, July 1995, pp. 401-425
Abstract: This paper studies the relationships between on-the-job training, wages and job performance by using the personnel records of a large manufacturing firm. Utilizing a company database avoids the biases that generally result when individuals are unable to accurately recall the amount of training they received and/or when definitions of training vary across diverse firms. The main findings presented in this paper are: (1) Controlling for information on days spent in formal training programs reduces the returns to tenure by 18%; (2) First-difference models of wage growth which eliminate heterogeneity bias in wage levels show that training has a positive and significant effect on wage growth; (3) Fixed-effects models that control for heterogeneity bias in wage growth still find a positive and significant effect of training on wage growth; and (4) Training leads to an improvement in job performance, as measured by performance rating scores.
Handle: RePEc:nbr:nberwo:4027
Template-Type: ReDIF-Paper 1.0
Title: Convertible Bonds as "Back Door" Equity Financing
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF
Number: 4028
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4028
File-URL: http://www.nber.org/papers/w4028.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, vol 32, no. 2 pp. 3-21 (August 1992)
Abstract: This paper argues that corporations may use convertible bonds as an indirect (albeit possibly risky) method for getting equity into their capital structures in situations where adverse selection problems make a conventional stock issue unattractive. Unlike other theories of convertible bond issuance, the model of this paper highlights: 1) the importance of call provisions on convertibles; and 2) the significance of costs of financial distress to the Information content of a convertible issue.
Handle: RePEc:nbr:nberwo:4028
Template-Type: ReDIF-Paper 1.0
Title: National Origin and Immigrant Welfare Recipiency
Author-Name: George J. Borjas
Author-Person: pbo44
Author-Name: Stephen J. Trejo
Author-Person: ptr78
Note: LS
Number: 4029
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4029
File-URL: http://www.nber.org/papers/w4029.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 50, no. 3 (1993): 325-344.
Abstract: This paper explores national origin differences in the welfare recipiency of immigrants to the United States. We develop an economic model of immigration which generates implications about how welfare utilization should vary according to characteristics of the country of origin. The empirical analysis reveals that a few source country characteristics explain over two-thirds of the variance of welfare recipiency rates across national origin groups, and changes in the average source country characteristics of the foreign-born population between 1970 and 1980 can account for most of the rise in immigrant welfare use that occurred over the decade.
Handle: RePEc:nbr:nberwo:4029
Template-Type: ReDIF-Paper 1.0
Title: Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment
Author-Name: David Card
Author-Person: pca271
Author-Name: Phillip B. Levine
Author-Person: ple553
Note: LS
Number: 4030
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4030
File-URL: http://www.nber.org/papers/w4030.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, vol 53, no. 1 (February 1994)
Abstract: We combine Current Population Survey microdata for 1979-1987 with a newly assembled database of tax rates for the Unemployment Insurance system to measure the effects of imperfect experience-rating on temporary layoffs and other types of unemployment. We find a strong negative association between the degree of experience-rating and the rate of temporary layoff unemployment, with the largest effect in recessionary years and the smallest effect in expansionary years. Increases in the degree of experience-rating are also associated with dampened seasonal fluctuations in temporary layoffs, particularly in construction and durable manufacturing. The correlation between the degree of experience-rating and the unemployment rate of permanent job losers is smaller but also negative, whereas the correlation with the unemployment Me of job quitters and re-entrants is negligible. Attempts to control for the endogeneity of unemployment insurance taxes are consistent with a causal interpretation of our findings.
Handle: RePEc:nbr:nberwo:4030
Template-Type: ReDIF-Paper 1.0
Title: Diminished Expectations of Nuclear War and Increased Personal Savings: Evidence From Individual Survey Data
Author-Name: Bruce Russett
Author-Name: Joel Slemrod
Author-Person: psl10
Note: EFG PE
Number: 4031
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4031
File-URL: http://www.nber.org/papers/w4031.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol 83, no 4, pp 1022-1033, Sept. 1993
Abstract: At the end of 1983 Gallup polls showed that 52 percent of Americans thought that the probability of a world war in the next 10 years was 50% or higher; by 1989 the percentage had dropped to 29%. Fear of war of this pervasiveness is bound to have an effect on decisions about present versus uncertain future consumption. This paper investigates the cross-sectional relationship between saving and fear of war using responses to telephone surveys conducted during April and October of 1990. The analysis shows that an individual's professed level of fear about the likelihood of nuclear war was significantly negatively related to the probability of being a saver rather than a dissaver, to changes in actual saving, and to saving plans relative to actual savings. Fear of war had an independent effect controlling for many demographic, economic and psychological characteristics. These results are broadly consistent with other evidence on the relationship between aggregate saving and fear of war over time and across countries.
Handle: RePEc:nbr:nberwo:4031
Template-Type: ReDIF-Paper 1.0
Title: College Scholarship Rules and Private Saving
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 4032
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4032
File-URL: http://www.nber.org/papers/w4032.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol.85, No.3, June 1995.
Abstract: This paper examines the effect of existing college scholarship rules on the incentive to save. The analysis shows that families that are eligible for college scholarships face "education tax rates" on capital income of between 22 percent and 47 percent in addition to regular slate and federal income taxes. The scholarship rules also impose an annual tax on previously accumulated assets. Through the combination of the implied tax on capital income and the associated tax on previously accumulated assets, the scholarship rules that apply to a middle-income family reduce the value of an extra dollar of accumulated assets by 30 cents in four years. A similar family with two children who attend college in succession will see an initial dollar of assets reduced to 50 cents. Such capital levies of 30 to 50 percent are a strong incentive not to save for college expenses but to rely instead on financial assistance and even on regular market borrowing, Moreover, since any foods saved for retirement are also SUbject to these education capital levies. the scholarship rules discourage retirement saving as well as saving for education. The empirical analysis developed here, based on the 1986 Survey of Consumer Finances, implies that these incentives do have a powerful effect on the actual accumulation of financial assets. More specifically, the estimated parameter values imply that the scholarship rules induce a typical household with a head aged 45 years old, with two precollege children, and with income of $40,000 a year to reduce accumulated financial assets by $23.124. approximately 50 percent of what would have been accumulated without the adverse effect of the scholarship rules.
Handle: RePEc:nbr:nberwo:4032
Template-Type: ReDIF-Paper 1.0
Title: The Bretton Woods International Monetary System: An Historical Overview
Author-Name: Michael D. Bordo
Author-Person: pbo243
Note: IFM ME DAE
Number: 4033
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4033
File-URL: http://www.nber.org/papers/w4033.pdf
File-Format: application/pdf
Publication-Status: published as A Retrospective on the Bretton Woods System, edited by Michael D. Bordo and Barry Eichengreen, pp. 3-98. Chicago: University of Chicago Press, 1993.
Publication-Status: published as Bordo, Michael D. "The Gold Standard, Bretton Woods And Other Monetary Regimes: A Historical Appraisal," FRB Saint Louis - Review, 1993, v75(2), 123-191.
Publication-Status: published as The Bretton Woods International Monetary System: A Historical Overview, Michael D. Bordo. in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, Bordo and Eichengreen. 1993
Abstract: This paper presents an overview of the Bretton Woods experience. From an historical perspective. I analyze its performance relative to other international monetary regimes. its origins. its operation. its problems and its demise. In the survey I emphasize both issues deemed important at the time and raise questions which may be of interest for the concerns of the present. Part 2 compares the macro performance of Bretton Woods with preceding and subsequent monetary regimes. The descriptive statistics on nine key macro variables point to one startling conclusion -- the Bretton Woods system. in its full convertibility phase 1959-1971, was the most stable regime for both nominal and real variables in the past century. Part 3 surveys the origins of Bretton Woods: the perceived problems of the inter war period; the plans for a new international monetary order and the steps leading to the outcome -- the Articles of Agreement. Part 4 examines the preconvertibility period from 1946 to 1958: the problems in getting the system started including the dollar shortage and the weakness of the IMF; and how the system evolved to convertibility and the gold dollar standard. Part 5 analyzes the heyday of Bretton Woods 1959 to 1971 in the context of the gold dollar standard and the famous three problems: adjustment. liquidity, and confidence. Part 6 considers the emergence of a "de facto" dollar standard in 1968 and its collapse in the face of a massive U.S. induced inflation. Part 7 considers why Bretton Woods was so stable and yet so short-lived. It also considers the importance of adherence to credible rules in the design of an effective international monetary system.
Handle: RePEc:nbr:nberwo:4033
Template-Type: ReDIF-Paper 1.0
Title: Differential Effects of Post-School Training on Early Career Mobility
Author-Name: Lisa M. Lynch
Author-Person: ply3
Note: LS
Number: 4034
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4034
File-URL: http://www.nber.org/papers/w4034.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Research, (April 1993).
Abstract: This paper examines in detail the factors that influence the probability of new entrants leaving their first job after completing school, including the differential effects of company provided training, apprenticeships, and training received off-the-job from for profit proprietary institutions. Particular attention is paid to how training effects vary by race, gender and educational attainment. In the paper it is shown that the majority of company provided training spells begin after an employee has been with an employer for at least one year while the majority of off-the-job training spells begin during the first year with an employer. Overall there is no significant difference in the probability of leaving the first employer by gender. Company provided training results in a lower probability of leaving an employer while off-the-job training increases the probability of leaving the first employer. Both of these effects are especially strong for women.
Handle: RePEc:nbr:nberwo:4034
Template-Type: ReDIF-Paper 1.0
Title: Near-Rationality, Heterogeneity and Aggregate Consumption
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Note: EFG
Number: 4035
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4035
File-URL: http://www.nber.org/papers/w4035.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, February 1995
Abstract: The simple permanent income model provides a good description of the medium-long run behavior of aggregate nondurables consumption, while it fails in describing its short run behavior. In this paper I present a non-representative agent model with near-rational microeconomic units that simultaneously explains the observed excess smoothness of consumption to wealth innovations, the excess sensitivity of consumption to lagged income changes, as well as small conditional asymmetries found in the data. In spite of the presence of large non-diversifiable idiosyncratic uncertainty, the estimated dollar equivalent utility cost of the micreconomic near-rational strategy required to explain the aggregate facts is only 0.26y percent of consumption per year, where y is the coefficient of relative risk aversion.
Handle: RePEc:nbr:nberwo:4035
Template-Type: ReDIF-Paper 1.0
Title: Testing for Price Anomalies in Real Estate Auctions
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: David Genesove
Author-Person: pge30
Note: AP IO
Number: 4036
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4036
File-URL: http://www.nber.org/papers/w4036.pdf
File-Format: application/pdf
Publication-Status: published as Papers and Proceedings, AER (American Economic Review), May 1992, p.501-505vol. 82, no. 2
Abstract: This paper reports on the results of an auction sale of 83 condominium apartment units in New Jersey. At the auction every unit was hammered down, but, unknown to the 2,348 registered bidders, 40% of the sales fell through. Prices in the subsequent sale of condominium units in face to face negotiations resulted in identical units selling for 13% less than they fetched at auction and the discount was largest for those units hammered down early in the auction. These results are inconsistent with the usual predictions from the theory of common value auctions and suggest that uninformed bidders in this auction may have been the subject of a "winner's curse" which generated considerable profit for the seller.
Handle: RePEc:nbr:nberwo:4036
Template-Type: ReDIF-Paper 1.0
Title: Training at Work: A Comparison of U.S. and British Youths
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Lisa M. Lynch
Author-Person: ply3
Note: LS
Number: 4037
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4037
File-URL: http://www.nber.org/papers/w4037.pdf
File-Format: application/pdf
Publication-Status: published as Training in the Private Sector, ed. Lisa Lynch, University of Chicago Press 1994. pp. 233
Publication-Status: published as Training at Work: A Comparison of U.S. and British Youths, David G. Blanchflower, Lisa M. Lynch. in Training and the Private Sector: International Comparisons, Lynch. 1994
Abstract: This paper compares and contrasts the structure of pest school training for young nonuniversity graduates in Britain and the United States. We utilize two unique longitudinal surveys in these countries on young people to examine four issues: the extent of pest school training in Britain and the U.S. and the wage gains associated with it; the link between formal training and further qualifications in Britain and the return to this on wages; differentials in the training experience by gender in the two countries; and the possible implications for skill development in Britain of dismantling significant elements of the traditional apprenticeship system. Our principal findings are that non-college graduates in Britain receive much more post school training than similar youths in the United States. This training is also linked with higher national recognized qualifications. The rates of return to pest school training in both countries is high. especially in the United States. The higher rates of return to training in the U.S. is consistent with underinvestment in training in the U.S.. When the sample is divided by gender, however, women in the U.S. receive more training than their British counterparts and their wages increase by a greater amount. As Britain has replaced the traditional apprenticeship system with a government-led program called Youth Training more women seem to be receiving training after school. However, far fewer young people are obtaining qualifications after their training.
Handle: RePEc:nbr:nberwo:4037
Template-Type: ReDIF-Paper 1.0
Title: Regional Growth and Migration: A Japan-U.S. Comparison
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 4038
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4038
File-URL: http://www.nber.org/papers/w4038.pdf
File-Format: application/pdf
Publication-Status: published as "Regional Growth and Migration: a Japan-U.S. Comparison," Japan and the World Economy, 1992 (with X. Sala-i-Martin).
Abstract: Do poor economies grow faster than rich ones? This important economic question (which we call [beta]-convergence) is analyzed in this paper using two regional data sets: 47 Prefectures in Japan and 48 States of the U.S.. We find clear evidence of convergence in both countries: poor prefectures and states grow faster. We also find that there is intraregional as well as interregional convergence. We analyze the cross sectional standard deviation across prefectures and states. We find that in both countries there has been a long term decline (a phenomenon that we call [sigma]-convergence). Finally we study the determinants of the rates of regional in-migration and, again. find striking similarities. In both countries, the reaction of net in-migration rates to the log of initial income is slightly above .025, which indicates a slow (although very significant) speed of population adjustment to income differentials. We find little evidence in favor of the argument that population movements are the reason why we find convergence across economies.
Handle: RePEc:nbr:nberwo:4038
Template-Type: ReDIF-Paper 1.0
Title: Conceptually Based Measures of Structural Adaptability
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 4039
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4039
File-URL: http://www.nber.org/papers/w4039.pdf
File-Format: application/pdf
Abstract: This paper provides definitions and measures of the extent of adaptability of an economy to exogenous changes in product prices, factor availability and technological change. It is argued that flexibility can in general only be defined relative to the exogenous changes that occur. Using a dual approach, measures of flexibility in response to the particular exogenous shock are developed. In addition, a decomposition of the total change in National Income into its component parts including gains due to flexibility or losses due to inflexibility is developed.
Handle: RePEc:nbr:nberwo:4039
Template-Type: ReDIF-Paper 1.0
Title: Moscow Black Markets and Official Markets for Foreign Exchange: How Much Flexiblity in Flexible Rates?
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Note: IFM
Number: 4040
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4040
File-URL: http://www.nber.org/papers/w4040.pdf
File-Format: application/pdf
Abstract: Flexible exchange-rate systems often are not recommended for countries undergoing economic transition. In late 1989, the former Soviet Union instituted exchange-rate flexibility on the limited share of enterprise international transactions channelled through the auction and. later, interbank markets for foreign-currency trade. This paper details the regulatory evolution of this system and analyses the impact of announced and implemented policy initiatives on two sets of flexible exchange rates observed in Moscow: i) the exchange-rates instituted through foreign-currency auctions and interbank markets; and ii) black-market exchange rates on dollar-ruble trade. We ask whether the flexible-rate system, as implemented, was associated with the negative or positive features of flexible exchange-rate systems. Initially the auction and interbank currency structure was used as a mechanism for a steady real depreciation of the ruble. Thereafter, the ruble was pegged in real terms at a level initially equal to the black-market exchange rate. This peg persisted until the end of 1991, when government central-bank foreign-exchange reserves were depleted and the crawling peg appears to have been abandoned. Throughout the sample, patterns in black-market exchange rates contrasted sharply with those of the auction rates. Black-market rates exhibited greater real variability and exhibited sharp speculative swings.
Handle: RePEc:nbr:nberwo:4040
Template-Type: ReDIF-Paper 1.0
Title: Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition
Author-Name: Timothy Besley
Author-Person: pbe46
Author-Name: Anne Case
Author-Person: pca108
Note: PE
Number: 4041
Creation-Date: 1992-03
Order-URL: http://www.nber.org/papers/w4041
File-URL: http://www.nber.org/papers/w4041.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Volume 85, No. 1, March 1995: pp. 25-45
Abstract: This paper presents a theoretical and empirical investigation of tax competition when voters use the tax policy of neighboring jurisdictions as information to evaluate the performance of their incumbent politicians. We show that this has implications both for voter tolerance of high taxes and for the process of tax setting itself, Our empirical results, which use two different tax data sets, confirm the importance of neighbors' taxes both on the probability of incumbent reelection and on tax setting behavior.
Handle: RePEc:nbr:nberwo:4041
Template-Type: ReDIF-Paper 1.0
Title: "New" Trade Theory and Policy a Decade Old: Assessment in a Pacific Context
Author-Name: J. David Richardson
Note: ITI
Number: 4042
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4042
File-URL: http://www.nber.org/papers/w4042.pdf
File-Format: application/pdf
Publication-Status: published as Higgott, R., R. Leaver, and J. Ravenhill (eds.) Pacific Economic Relations in the 1990s: Cooperation or Conflict? Lynne Rinner Publishers, 1993.
Abstract: This paper characterizes and evaluates what has been called variously the new, new-view, strategic or industrial organization approach to international trade and trade policy. This approach analyzes trade in strategic environments,' those in which small numbers of large, self-consciously independent agents interact, and in which their activities themselves are interdependently (strategically) linked. The new view's perspectives have been controversial but often because they have been misunderstood. Many of its subtler strengths have remained hidden. The misunderstandings and subtler strengths of the approach are the main themes of the paper. Its secondary emphasis is on applied and empirical work in the new tradition and its policy implications, with special regard to Pacific trade and investment.
Handle: RePEc:nbr:nberwo:4042
Template-Type: ReDIF-Paper 1.0
Title: Empirical Testing of Asset Pricing Models
Author-Name: Bruce N. Lehmann
Note: AP
Number: 4043
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4043
File-URL: http://www.nber.org/papers/w4043.pdf
File-Format: application/pdf
Abstract: This essay reviews the extensive literature on empirical testing of asset pricing models. It briefly describes the kinds of asset pricing models typically tested in the literature and explicates their econometric implications, both in terms of the estimation of relevant parameters and tests of their implied restrictions. Pertinent aspects of the available data on security prices and macroeconomic variables are discussed as well. The essay concludes with the examination of selected aspects of the current empirical state of asset pricing theory.
Handle: RePEc:nbr:nberwo:4043
Template-Type: ReDIF-Paper 1.0
Title: A Test of Negotiation and Incentive Compensation Models Using Longitudinal French Enterprise Data
Author-Name: John M. Abowd
Author-Person: pab175
Author-Name: Francis Kramarz
Author-Person: pkr29
Note: LS
Number: 4044
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4044
File-URL: http://www.nber.org/papers/w4044.pdf
File-Format: application/pdf
Publication-Status: published as van Ours, J.C., G.A. Pfann and G. Ridder (eds.) Labour Demand and Equilibrium Wage Formation Contributions to Economic Analysis. Amsterdam: NorthHolland, 1993.
Abstract: In this paper we model the determinants of firm level wages and employment explicitly allowing for firm and worker heterogeneity. Our firms have three types of workers (cadres, skilled and unskilled) and may explicitly choose from among three distinct contracting regimes (strong form efficiency, labor demand/right to manage, and incentive contracting). We apply the model to a representative sample of 1,097 French enterprises for the period 1978 to 1987. We find that firms with enterprise level agreements appear to implement incentive contracts. This is significant because in France a firm level agreement is voluntary. On the other hand, firms without accords appear to operate on their labor demand curves. That is, they make labor demand decisions using the sector level agreement as the relevant wage rate. Efficient contracts are dominated by the other two contractual possibilities. External wage rates, which we estimate for each group of workers within each firm, appear not to influence employment decisions in the manner predicted by efficient contracts regardless of the accord status of the firm.
Handle: RePEc:nbr:nberwo:4044
Template-Type: ReDIF-Paper 1.0
Title: On the Growth Effects of Import Competition
Author-Name: Richard E. Baldwin
Author-Person: pba124
Note: EFG ITI
Number: 4045
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4045
File-URL: http://www.nber.org/papers/w4045.pdf
File-Format: application/pdf
Abstract: This paper shows that the market structure of an economy's research sector is an important determinant of the aggregate growth rate, even though it has hereto been ignored in the new growth literature. To make this point in a concrete context, a simple model is used to show that import competition may stimulate growth by reducing the market power of domestic innovators. Specifically, import competition forces domestic innovators to chose between either quickening their pace of innovation or being displaced by foreign innovators. The pro-growth effect of import competition is shown to be welfare-increasing. The paper studies a number of policy implications including the growth effects of anti-trust policy, partial liberalization and trade in intellectual property rights.
Handle: RePEc:nbr:nberwo:4045
Template-Type: ReDIF-Paper 1.0
Title: Union Threat Effects and Nonunion Industry Wage Differentials
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Michael L. Wachter
Note: LS
Number: 4046
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4046
File-URL: http://www.nber.org/papers/w4046.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David and Michael L. Wachter. "Union Effects Of Nonunion Wages: Evidence From Panel Data On Industries And Cities," International Labor Relations Review, 1995, v49(1), 20-38.
Abstract: We investigate the impact of union strength on changes in nonunion wages and employment. The prevailing model in this area is the threat model, which predicts that increases in union strength cause increases in nonunion wages and decreases in nonunion employment. In testing the threat model, we are also testing two alternatives, the crowding and complements models. In contrast to the prediction of the threat model, decreases in the percent organized (reflecting a declining union threat) are associated with increases in the nonunion wage. Furthermore, increases in union wages appear to decrease, rather than to increase, nonunion wages. Evidence on the determinants of intra-industry variation in nonunion wage premia is somewhat more consistent with the crowding model and is strikingly consistent with the complements model of union and nonunion wage determination. Further evidence on the determinants of intra-industry variation in nonunion employment is consistent with the complements model and the threat model; movements in nonunion industry employment are negatively related to changes in proxies for union strength. Thus, the combined evidence supports the complements model, but neither the threat model nor the crowding model.
Handle: RePEc:nbr:nberwo:4046
Template-Type: ReDIF-Paper 1.0
Title: Devaluation Controversies in the Developing Countries: Lessons From the Bretton Woods Era
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Julio A. Santaella
Note: IFM
Number: 4047
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4047
File-URL: http://www.nber.org/papers/w4047.pdf
File-Format: application/pdf
Publication-Status: published as Retrospecive on the Bretton Woods System Eds. Michael Bordo and Barry Eichengreen UCP 1993
Publication-Status: published as Devaluation Controversies in the Developing Countries: Lessons from the Bretton Woods Era, Sebastian Edwards, Julio Santaella. in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, Bordo and Eichengreen. 1993
Abstract: This paper uses historical data from the Bretton Woods era to analyze the effectiveness of devaluation-based adjustment programs in the developing countries. Forty eight major devaluations undertaken between 1954 and 1971 are investigated in detail in an effort to understand the circumstances leading to these adjustment programs, as well as their degree of effectiveness. An important aspect of the analysis is the distinction between devaluations undertaken within the context of IMF programs, and devaluations implemented independently. We find out that, in general, countries with lower income per capita and deeper economic problems tended to seek IMF support with greater frequency. Also, our analysis indicates that countries with left-wing leaning governments were less likely to embark on IMF programs. With respect to the effectiveness of these devaluation programs, our findings support the notion that devaluations accompanied by restrictive and consistent macroeconomic policies are an efficient and powerful adjustment tool. Our historical investigation also shows that, in general, countries that embarked on IMF stand-by programs tended to perform better than countries that adjusted on their own.
Handle: RePEc:nbr:nberwo:4047
Template-Type: ReDIF-Paper 1.0
Title: Adoption of Technologies With Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines
Author-Name: Garth Saloner
Author-Name: Andrea Shepard
Note: IO
Number: 4048
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4048
File-URL: http://www.nber.org/papers/w4048.pdf
File-Format: application/pdf
Publication-Status: published as Garth Saloner & Andrea Shepard. "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines," The RAND Journal of Economics, Vol. 26, No. 3 (Autumn, 1995), pp. 479-501 (23 pages)
Abstract: The literature on networks suggests that the value of a network is positively affected by the number of geographically dispersed locations it serves (the "network effect") and the number of its users (the "production scale effect"). We show that as a result a firm's expected time until adoption of technologies with network effects declines in both users and locations. We provide empirical evidence on the adoption of automated teller machines by banks that is consistent with this prediction. Using standard duration models, we find that a bank's date of adoption is decreasing in the number of its branches (a proxy for the number of locations and hence for the network effect) and the value of its deposits (a proxy for number of users and hence for production scale economies). The network effect is the larger of the two effects.
Handle: RePEc:nbr:nberwo:4048
Template-Type: ReDIF-Paper 1.0
Title: Sources of Output Fluctuations During the Interwar Period: Further Evidence on the Causes of the Great Depression
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Georgios Karras
Note: ME
Number: 4049
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4049
File-URL: http://www.nber.org/papers/w4049.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 49, March 1994, pp. 123-152.
Abstract: This paper decomposes output fluctuations during the 1913 to 1940 period into components resulting from aggregate supply and aggregate demand shocks. We estimates a number of different models, all of which yield qualitatively similar results. While identification is normally achieved by assuming that aggregate demand shocks have no long run real effects, we also estimate models that allow demand shocks to permanently affect output. Our findings support the following three conclusions: (i) there was a large negative aggregate demand shock in November 1929, immediately after the stock market crash; (ii) aggregate demand shocks are mainly responsible for the decline in output through mid to late 1931; (iii) beginning in mid 1931 there is an aggregate supply collapse that coincides with the onset on severe bank panics.
Handle: RePEc:nbr:nberwo:4049
Template-Type: ReDIF-Paper 1.0
Title: Is Japan Creating a Yen Bloc in East Asia and the Pacific?
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Note: IFM ITI
Number: 4050
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4050
File-URL: http://www.nber.org/papers/w4050.pdf
File-Format: application/pdf
Publication-Status: published as Garnaut, R. and P. Drysdale, eds. 1994. Asia Pacific Regionalism: Readings in International Economic Relations, Harper, Australia, pp. 227-249
Publication-Status: published as Is Japan Creating a Yen Bloc in East Asia and the Pacific?, Jeffrey A. Frankel. in Regionalism and Rivalry: Japan and the United States in Pacific Asia, Frankel and Kahler. 1993
Abstract: This paper reaches seven conclusions regarding the Yen Bloc that Japan is reputed to be forming in Pacific Asia. (1) Gravity-model estimates of bilateral trade show that the level of trade in East Asia is biased intra-regionally, as it is within the European Community and within the Western Hemisphere, to a greater extent than can be explained naturally by distance. One might call these three regions 'super-natural' blocs, in contrast to Krugman's "natural" trade blocs. (2) There is no evidence of a special Japan effect. (3) Once one properly accounts for rapid growth in Asia, the statistics do not bear out a trend toward intra-regional bias of trade flows. (4) The world's strongest trade grouping is the one that includes the U.S. and Canada with the Asian/Pacific countries, i.e., APEC. (5) There is a bit more evidence of rising Japanese influence in East Asia's financial markets. Tokyo appears to have acquired significant influence over interest rates in a few Asian countries, though overall its influence is as yet no greater than that of New York. (6) Some of Japan's financial and monetary influence takes place through a growing role for the yen, at the expense of the dollar, The yen has become relatively more important in exchange rate policies and invoicing of trade and finance in the region. (7) But this trend is less the outcome of Japanese policy-makers' wishes, than of pressure from the U.S. government to internationalize the yen.
Handle: RePEc:nbr:nberwo:4050
Template-Type: ReDIF-Paper 1.0
Title: Noncooperative Equilibria in Regional Environmental Policies When Plant Locations are Endogenous
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Edward R. Morey
Author-Name: Nancy Olewiler
Note: ITI
Number: 4051
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4051
File-URL: http://www.nber.org/papers/w4051.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 56, 1995, pp. 55-77.
Abstract: A two-region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level, and in which shipping costs exist between the two markets. Production of the good causes local pollution, and regional governments can levy pollution taxes or impose environmental regulations. The firm decides. partly on the basis of these environmental policy variables, whether to maintain plants in both regions, serve both regions from a single plant or shut down. A non-cooperative equilibrium in regional environmental policies occurs when each region is choosing the environmental policy that maximizes its welfare given the environmental policy in the other region. Two types of harmful tax (regulatory) competitions are documented. If the disutility of pollution is high enough, each region will only want the polluting good produced in the other region and the two regions will likely compete by increasing their environmental taxes (standards) until the polluting firm is driven from the market. This is the case of "Not in my backyard". Alternatively, if the disutility from pollution is not as great, each region will realize that their welfare could decrease if their environmental policy causes the firm to not operate in their region. In this case, the regions will usually compete by undercutting each others pollution tax rates (environmental standards).
Handle: RePEc:nbr:nberwo:4051
Template-Type: ReDIF-Paper 1.0
Title: Does the Human-Capital/Educational-Sorting Debate Matter for Development Policy?
Author-Name: Kevin Lang
Author-Person: pla83
Note: LS
Number: 4052
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4052
File-URL: http://www.nber.org/papers/w4052.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 84, no. 1 (1994): 353-358.
Abstract: If education increases human capital, subsidizing education can generate economic growth and combat poverty. Estimates of its return suggest that education is a good social investment. In sorting models, the return reflects in part the information about productivity revealed by the worker's education. Thus the social and private returns diverge. It might appear that if we believe the sorting model, we should be less swayed by evidence that estimated returns to education exceed the social discount rate, and therefore less likely to support education-based development policies. This conclusion is shown to be incorrect.
Handle: RePEc:nbr:nberwo:4052
Template-Type: ReDIF-Paper 1.0
Title: Interest Differentials Under Fixed and Flexible Exchange Rates: The Effects of Capital Controls and Exchange Risk
Author-Name: Richard C. Marston
Note: IFM
Number: 4053
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4053
File-URL: http://www.nber.org/papers/w4053.pdf
File-Format: application/pdf
Publication-Status: published as A Retrospective on the Bretton Woods System, Eds. Michael Bordo and Barry Eichengreen, UCP 1993
Abstract: This paper examines evidence on interest differentials under the Bretton Woods system of fixed exchange rates and under the flexible rate system which succeeded it. Under the Bretton Woods system, many countries resorted to capital controls in an attempt to pursue independent monetary policies. In the three major countries studied in this paper, Britain, Germany and the United States, these capital controls resulted in large differentials between national interest rates covered for exchange risk. The capital controls and resulting interest differentials distorted many cross-border investment and borrowing decisions. The paper compares these covered interest differentials with uncovered interest differentials in the Eurocurrency markets which are free of capital controls. In both fixed and flexible periods, average uncovered differentials between Eurodollar interest rates and four other Eurocurrency rates are in most cases close to zero. So these average uncovered interest differentials, whether attributable to exchange risk premiums or forecast errors, are much smaller than average covered interest differentials between national markets due to capital controls. If exchange risk premiums have significant effects on uncovered interest differentials in some periods, these premiums must be time-varying with a mean close to zero over the long sample periods studied. Similarly, if forecast errors have systematic components in some periods, in the long sample periods studied these errors have a mean close to zero as well.
Handle: RePEc:nbr:nberwo:4053
Template-Type: ReDIF-Paper 1.0
Title: "Excess Volatility" and the German Stock Market, 1876-1990
Author-Name: J. Bradford De Long
Author-Name: Marco Becht
Note: AP
Number: 4054
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4054
File-URL: http://www.nber.org/papers/w4054.pdf
File-Format: application/pdf
Abstract: This paper uses long-run real price and dividends series to investigate for the German stock market the questions asked of the U.S. market by Shiller (1989). It tries to determine in what periods and to what degree the German stock market has also possessed excess volatility' in the past century. It finds no evidence of excess volatility in the pre-World War I German stock market. By contrast, there is some evidence of excess volatility in the post-World War II German stock market. The role played by the German Grosbanken in the pre-World War I stock market might be the cause of low comparative volatility of German stock indices before 1914.
Handle: RePEc:nbr:nberwo:4054
Template-Type: ReDIF-Paper 1.0
Title: Spatial and Temporal Aggregation in the Dynamics of Labor Demand
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 4055
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4055
File-URL: http://www.nber.org/papers/w4055.pdf
File-Format: application/pdf
Publication-Status: published as Labor Demand and Equilibrium Wage Formation North-Holland Press, 1993
Abstract: The paper demonstrates the general difficulty of inferring the structure of adjustment costs from aggregated, including industry data, except in the unlikely case that costs are symmetric and quadratic at the micro level. The implications of this difficulty for cross-national comparisons of adjustment costs, and for attempts to infer the structure of these costs without micro data, are examined. In the voluminous literature on dynamic labor demand studies based on annual data generally find longer lags than those that use quarterly data, which in turn produce longer lags than models estimated using monthly data. However, when a consistent set of U.S. industry time series is used, and quadratic symmetric costs are assumed, the estimated length of the lag is independent of the frequency of observation. This conclusion is clearly not general: If we assume the costs of adjusting labor demand are lumpy, inferences about their structure differ greatly depending on how often the data are observed.
Handle: RePEc:nbr:nberwo:4055
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Persistent Income Inequality
Author-Name: Steven N. Durlauf
Author-Person: pdu117
Note: EFG
Number: 4056
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4056
File-URL: http://www.nber.org/papers/w4056.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economics Growth, Vol. 1, no. 1 (March 1996): 75-93.
Abstract: This paper explores the dynamics of income inequality by studying the evolution of human capital investment and neighborhood choice for a population of families. Parents affect the conditional probability distribution of their children's income through the choice of a neighborhood in which to live. Neighborhood location affects children through two mechanisms. First, the level of education depends on the total income of a neighborhood, as all school funding is determined by majority voting. Human capital markets are incomplete as neighborhoods cannot borrow to supplement tax revenues available for education. Second, the conditional probability distribution of individual-specific productivity shocks is affected by the income distribution within a neighborhood. This dependence reflects cultural influences such as the presence in a community of successful role models. These forces interact to endogenously stratify the economy as families segregate themselves into economically homogeneous neighborhoods. Our model has two important features. First, starting from identical initial conditions, families can exhibit different long term income levels, leading to persistent income inequality. Second, areas of permanent poverty can emerge endogenously in a growing economy as neighborhood-wide feedback effects transmit poverty across generations.
Handle: RePEc:nbr:nberwo:4056
Template-Type: ReDIF-Paper 1.0
Title: Attitudes Towards Inflation and the Viability of Fixed Exchange Rates: Evidence From the EMS
Author-Name: Susan M. Collins
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Note: IFM
Number: 4057
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4057
File-URL: http://www.nber.org/papers/w4057.pdf
File-Format: application/pdf
Publication-Status: published as Attitudes toward Inflation and the Viability of Fixed Exchange Rates: Evidence from the EMS, Susan M. Collins, Francesco Giavazzi. in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, Bordo and Eichengreen. 1993
Abstract: History provides us with many examples of multiple country fixed exchange rate regimes that have eventually fallen apart. In light of these failures, why has the EMS been so successful in stabilizing exchange rates among members, and in expanding its membership? This paper argues that one key aspect of the explanation lies in a convergence in attitudes toward inflation and unemployment among EMS members since the late 1970s. This paper presents new empirical evidence for this convergence using household survey data for eight European countries during 1974-90. We find evidence that initially high inflation countries -- France and Italy -- have experienced a decrease in tolerance for inflation relative to unemployment. Germany and other low inflation countries, in contrast, appear to have experienced a decrease in tolerance for unemployment. The paper also contains a theoretical section that illustrates why shifts in attitudes of voters within a given country might lead that country to join a fixed exchange rate regime.
Handle: RePEc:nbr:nberwo:4057
Template-Type: ReDIF-Paper 1.0
Title: Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage
Author-Name: David Card
Author-Person: pca271
Note: LS
Number: 4058
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4058
File-URL: http://www.nber.org/papers/w4058.pdf
File-Format: application/pdf
Publication-Status: published as David Card, 1992. "Using regional variation in wages to measure the effects of the federal minimum wage," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
Abstract: The imposition of a national wage standard sets up a useful natural experiment in which the "treatment effect" varies across states depending on the fraction of workers earning less than the new minimum. I use this idea to evaluate the effect of the April 1990 increase in the Federal minimum wage on teenage wages, employment, and school enrollment. Interstate variation in teenage wages was high at the end of the 1980s, in part because 16 states had enacted state-specific minimums above the prevailing Federal rate. Comparisons of grouped and individual state data confirm that the rise in the minimum wage significantly increased teenage wages. There is no evidence of corresponding losses in teenage employment, or changes in teenage school enrollment.
Handle: RePEc:nbr:nberwo:4058
Template-Type: ReDIF-Paper 1.0
Title: Productivity and Firm Turnover in Israeli Industry: 1979-1988
Author-Name: Zvi Griliches
Author-Name: Haim Regev
Note: PR
Number: 4059
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4059
File-URL: http://www.nber.org/papers/w4059.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, vol 65, no. 1, pp.175-203, 1995
Abstract: An analysis of a large panel data set on Israeli industrial firms finds that most of the growth in aggregate productivity comes from productivity changes within firms rather than from entry, exit, or differential growth; that firms which will exit in the future have lower productivity performance several years earlier (the "shadow of death" effect); and that, overall, there was little total factor productivity growth in Israeli industry during 1979-1988 (another "lost decade").
Handle: RePEc:nbr:nberwo:4059
Template-Type: ReDIF-Paper 1.0
Title: R&D, Investment and Industry Dynamics
Author-Name: Saul Lach
Author-Person: pla110
Author-Name: Rafael Rob
Note: PR
Number: 4060
Creation-Date: 1992-04
Order-URL: http://www.nber.org/papers/w4060
File-URL: http://www.nber.org/papers/w4060.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Management and Strategy, vol. 5, no. 2, June 1996, pp. 217-249.
Publication-Status: published as Saul Lach & Rafael Rob, 1996. "R&D, Investment, and Industry Dynamics," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 217-249, 06.
Abstract: We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations, followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an intangible stock (knowledge) while the second accumulates physical capital; both stocks affect output in a symmetric fashion. We argue that the story is not that simple, and there is more to it than differences in the object of accumulation. Our model stresses the causal relationship between past R&D expenditures and current investments in machinery and equipment. This causality pattern, which is supported by the data, also explains the observed higher volatility of physical investment (relative to R&D expenditures).
Handle: RePEc:nbr:nberwo:4060
Template-Type: ReDIF-Paper 1.0
Title: Do the Costs of a Carbon Tax Vanish When Interactions With Other Taxes are Accounted For?
Author-Name: Lawrence H. Goulder
Note: PE
Number: 4061
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4061
File-URL: http://www.nber.org/papers/w4061.pdf
File-Format: application/pdf
Abstract: Previous analyses of U.S. carbon taxes have tended to ignore interactions between this tax and other, pre-existing U.S. taxes. This paper assesses the effects of the carbon tax using a model that addresses these interactions. The model is unique in integrating a detailed treatment of taxes and attention to nonrenewable resource supply dynamics within a disaggregated general equilibrium framework. We find that the GNP and welfare costs of the carbon tax are significantly lower than what would be predicted if tax interactions were disregarded. When the revenues are used to finance reductions in marginal taxes at the personal or corporate level, the welfare costs are 25-32 percent lower than when the revenues finance lump-sum reductions in taxes. Pre-existing distortions -- specifically, the relatively light taxation of fossil-fuel-producing industries in comparison with other industries -- imply that the gross efficiency costs of carbon taxes are about 15 percent lower than would be the case if fossil-fuel-producing industries were not initially tax-favored.
Handle: RePEc:nbr:nberwo:4061
Template-Type: ReDIF-Paper 1.0
Title: A Growth Model of Inflation, Tax Evasion, and Financial Repression
Author-Name: Nouriel Roubini
Author-Person: pro145
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: ME EFG
Number: 4062
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4062
File-URL: http://www.nber.org/papers/w4062.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, 35, pp.275-301, April 1995.
Abstract: In this paper we study the effects of policies of financial repression on long term growth and try to explain why optimizing governments might want to repress the financial sector. We also explain why inflation may be negatively related to growth, even though it does not affect growth directly. We argue that the main reason why governments repress the financial sector is that this sector is the source of "easy" resources for the public budget The source of revenue stemming from this intervention is modeled through the inflation tax. Our model has the implication that financial development reduces money demand. Hence, if the government allows for financial development the inflation tax base, and the chance to collect seigniorage, is reduced. To the extent that the financial sector increases the efficiency of the allocation of savings to productive investment, the choice of the degree of financial development will have real effects on the saving and investment rate and on the growth rate of the economy. We show that in countries where tax evasion is large the government will optimally choose to repress the financial sector in order to increase seigniorage taxation. This policy will then reduce the efficiency of the financial sector, increase the costs of intermediation, reduce the amount of investment and reduce the steady state rate of growth of the economy. Financial repression will therefore be associated with high tax evasion, low growth and high inflation.
Handle: RePEc:nbr:nberwo:4062
Template-Type: ReDIF-Paper 1.0
Title: Taxation and the Structure of Labor Markets: The Case of Corporatism
Author-Name: Lawrence H. Summers
Author-Person: psu137
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Rodrigo Vergara
Note: PE
Number: 4063
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4063
File-URL: http://www.nber.org/papers/w4063.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, May 1993
Abstract: We propose an explanation for the wide variation in rates of taxation across developed economies, based on differences in labor market institutions. In "corporatist" economies, which feature centralized labor markets, taxes on labor input will be less distortionary than when labor supply is determined individually. Since the level of labor supply is set by a small group of decision-makers, these individuals will recognize the linkage between the taxes that workers pay and the benefits that they receive. Labor tax burdens are indeed higher in more corporatist nations, and non-labor taxes are lower, which is consistent with this theory. There is also some evidence that the distortionary effects of labor taxes are lower in more corporatist economies.
Handle: RePEc:nbr:nberwo:4063
Template-Type: ReDIF-Paper 1.0
Title: Foreign Trade in Eastern Europe's Transition: Early Results
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI
Number: 4064
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4064
File-URL: http://www.nber.org/papers/w4064.pdf
File-Format: application/pdf
Publication-Status: published as The Transition in Eastern Europeedited by Olivier J. Blanchard, Kenneth A. Froot, and Jeffrey D. Sachs University of Chicago Press: 1994
Publication-Status: published as Foreign Trade in Eastern Europe's Transition: Early Results, Dani Rodrik. in The Transition in Eastern Europe, Volume 2, Restructuring, Blanchard, , and Sachs. 1994
Abstract: By the end of 1991, Czechoslovakia, Hungary and Poland have achieved a substantial degree of openness to foreign trade. In all three countries, trade is now de-monopolized and licensing and quotas playa very small role. Exchange controls have virtually disappeared for current-account transactions. Judging by partner statistics, export performance has been impressive in all three countries, and import booms are under way in at least Hungary and Poland as well. However, there is no evidence that exporters have had any success in finding Western markets for the exports they have lost in Eastern markets. The collapse of the CMEA represents a significant shock, amounting to a loss of real income of 3 1/2 percent of GDP in Poland and 7-8 percent of GDP in Hungary and Czechoslovakia. Export performance is attributable to exchange-rate policy in part, but the collapse of domestic demand has possibly played an even more important role. Finally, trade liberalization so far appears to have had little effect on price discipline, in large part because of the substantial devaluations that have accompanied it
Handle: RePEc:nbr:nberwo:4064
Template-Type: ReDIF-Paper 1.0
Title: Top Executive Rewards and Firm Performance: A Comparison of Japan and the U.S.
Author-Name: Steven N. Kaplan
Note: CF
Number: 4065
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4065
File-URL: http://www.nber.org/papers/w4065.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, vol. 102, no. 3, pp. 510-546, (June 1994).
Abstract: This paper compares CEO and top management turnover and its relation to firm performance in the largest companies (by sales) in Japan and the U.S. Japanese top managers are older and have shorter tenures as top managers than their U.S. counterparts. Overall, however, turnover-performance relations are economically and statistically similar: turnover is negatively related to stock, sales, and earnings performance in both countries. Turnover in Japan is particularly sensitive to low earnings. Evidence on executive compensation confirms that Japanese executives own less stock and receive lower cash compensation than U.S. executives. Cash compensation performance relations, nevertheless, are also similar in magnitude to those found in previous work for U.S. executives.
Handle: RePEc:nbr:nberwo:4065
Template-Type: ReDIF-Paper 1.0
Title: Empirical Linkages Between Democracy and Economic Growth
Author-Name: John F. Helliwell
Author-Person: phe368
Note: ITI EFG
Number: 4066
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4066
File-URL: http://www.nber.org/papers/w4066.pdf
File-Format: application/pdf
Publication-Status: published as British Journal of Political Science, vol. 24, pp. 225-248, April 1994
Abstract: Using cross-sectional and pooled data for up to 125 countries over the period from 1960 to 1985, this paper evaluates the two-way linkages between democracy and economic growth. The effects of income on democracy are found to be robust and positive. The effects of several measures of democracy on growth are assessed in a comparative growth framework in which growth of per capita GDP depends negatively on initial income levels, as implied by the convergence hypothesis, and positively on rates of investment in physical and human capital. Adjusting for the simultaneous determination of income and democracy makes the estimated direct effect of democracy on subsequent economic growth negative but insignificant. Allowing for the possible positive indirect effect of democracy on income, flowing through the positive effect of democracy on education and investment, tends to offset the negative direct effect of democracy on economic growth. The general result of the growth analysis is that it is still not possible to identify any systematic net effects of democracy on subsequent economic growth.
Handle: RePEc:nbr:nberwo:4066
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Payoff to Schooling Using the Vietnam-Era Draft Lottery
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 4067
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4067
File-URL: http://www.nber.org/papers/w4067.pdf
File-Format: application/pdf
Abstract: Between 1970 and 1973 priority for military service was randomly assigned to draft-age men in a series of lotteries. Many men who were at risk of being drafted managed to avoid military service by enrolling in school and obtaining an educational deferment This paper uses the draft lottery as a natural experiment to estimate the return to education and the veteran premium. Estimates are based on special extracts of the Current Population Survey for 1979and 1981-85. The results suggest that an extra year of schooling acquired in response to the lottery is associated with6.6 percent higher weekly earnings. This figure is about 10 percent higher than the OLS estimate of the return to education in this sample, which suggests there is omitted-variable bias in conventional estimates of the return to education. Our findings are robust to a variety of assumptions about the effect of veteran status on earnings.
Handle: RePEc:nbr:nberwo:4067
Template-Type: ReDIF-Paper 1.0
Title: The Expected Timing of EMS Realignments: 1979-83
Author-Name: Susan M. Collins
Note: IFM
Number: 4068
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4068
File-URL: http://www.nber.org/papers/w4068.pdf
File-Format: application/pdf
Abstract: This paper develops and estimates a model of the time at which market participants expected the French franc to be devalued relative to the German deutschemark during the early years of the European Monetary System. The model assumes that the expected time of exchange rate realignment is determined by the time at which foreign exchange reserves in the Banque de France first fall below a critical threshold level, and that reserves are a Brownian motion process with a drift that depends on current economic conditions. Thus, the probability distribution for the time of the next realignment is an Inverse Gaussian distribution. The empirical analysis uses the term structure of forward exchange rate premia to form indicators of perceived probabilities of realignment over various time horizons. The model fits quite well, especially prior to the March 1983 realignment. The estimation suggests that the expected timing of realignments was quite sensitive to the level of reserves in France and to factors that affect the mean rate of change of reserves.
Handle: RePEc:nbr:nberwo:4068
Template-Type: ReDIF-Paper 1.0
Title: Strategic Trade Policy With Incompletely Informed Policymakers
Author-Name: S. Lael Brainard
Author-Name: David Martimort
Author-Person: pma1390
Note: ITI
Number: 4069
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4069
File-URL: http://www.nber.org/papers/w4069.pdf
File-Format: application/pdf
Publication-Status: Published as "Strategic Trade Policy Design with Asymmetric Information and Public Contracts", Review of Economic Studies, Vol. 63, no. 1 (January 1996): 81-105.
Publication-Status: published as Journal of International Economics, Vol. 42, no. 1-2 (February 1997): 33-65.
Publication-Status: Published as "Strategic Trade Policy Design with Asymmetric Information and Public Contracts: Corrigendum", Review of Economic Studies, Vol. 65, no. 3 (July 1998): 627-630.
Abstract: Ever since the inception of research on strategic trade policy, economists have warned that the informational requirements are high, and unlikely to be met in practice. This paper investigates the implications of incomplete information for a simple, rent-shifting trade policy of the type proposed in Brander-Spencer (1985). We find that asymmetric information undermines the precommitrnent effect of unilateral government intervention. This "screening" effect induces a downward distortion in the optimal subsidy, and it may be so great as to require a tax rather than a subsidy for high levels of uncertainty, given a zero-profit participation constraint. Second, in contrast to the full-information case with strategic substitutes, the introduction of a rival interventionist government reinforces rather than countervails the precommitment effect, by reducing the incentive for the domestic firm to misrepresent its private information. Finally, when a nonintervention-profit participation constraint is substituted for the conventional zero-profit participation constraint to take into account the special relationship between firms and policymakers in trade, the government eschews intervention altogether for high levels of uncertainty.
Handle: RePEc:nbr:nberwo:4069
Template-Type: ReDIF-Paper 1.0
Title: Do Doctoral Students' Financial Support Patterns Affect Their Times-to-Degree and Completion Probabilities
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Panagiotis G. Mavros
Note: LS
Number: 4070
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4070
File-URL: http://www.nber.org/papers/w4070.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, vol. 30, no. 3, pp. 581-609, (Summer 1995).
Abstract: Projections of forthcoming shortages of Ph.D.s abound. Part of the reason is that American college graduates are much less likely to receive doctorates today than thcy were 20 years ago. Two important factors in this decline may be the increase in the length of time necessary for doctorate students to complete their programs that occurred over the period and the low completion rates of entrants into doctoral programs. Among the policies urged to prevent future Ph.D. shortages are increasing support for graduate students. Surprisingly little empirical evidence is available on how different types of support (fellowships. research assistantships, teaching assistantships) are likely to influence times-to-degree and completion rates. Our paper uses data on all graduate students who entered Ph.D. programs in four fields during a 25-year period at a single major doctorate producing university to estimate how graduate student financial support patterns influence these outcomes. We find that completion rates and mean durations of times-to-completion are sensitive to the types of financial support the students received. Other things held constant, students who receive fellowships or research assistantships have higher completion rates and shorter times-to-degree than students who receive teaching assistantships or tuition waivers, or who are totally self-supporting. A major finding Is that the Impact of financial support patterns on the fraction of students who complete programs is much larger than its impact on mean durations of times-to-degree.
Handle: RePEc:nbr:nberwo:4070
Template-Type: ReDIF-Paper 1.0
Title: GATT, Dispute Settlement and Cooperation
Author-Name: Dan Kovenock
Author-Name: Marie Thursby
Author-Person: pth283
Note: ITI
Number: 4071
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4071
File-URL: http://www.nber.org/papers/w4071.pdf
File-Format: application/pdf
Publication-Status: published as Economics and Politics Volume 4, #2, pp. 151-170 (July 1992).
Publication-Status: published as Reprinted in Analytical and Negotiating Issues in the Global Trading System , edited by Robert Stern (1994), University of Michigan Press.
Abstract: This paper analyzes GATT and its dispute settlement procedure (DSP) in the context of a supergame model of international trade featuring both explicit and implicit agreements. An explicit agreement, such as GATT, may be violated at some positive cost in addition to retaliatory actions that might be induced by the violation. We interpret this cost as arising from 'international obligation," a phenomenon frequently mentioned in the legal literature on GATT. We focus on how international obligation affects two aspects of GAIT-DSP: unilateral retaliation and the effect of inordinate delays in the operation of DSP.
Handle: RePEc:nbr:nberwo:4071
Template-Type: ReDIF-Paper 1.0
Title: The Production and Cost Structure of Israeli Industry: Evidence From Individual Firm Data
Author-Name: Arie Bregman
Author-Name: Melvyn Fuss
Author-Name: Haim Regev
Note: PR
Number: 4072
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4072
File-URL: http://www.nber.org/papers/w4072.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, Annals of Econometrics, vol. 65, no. 1, pp. 45-81, 1995
Abstract: The main purpose of this paper is to present estimates of production and cost functions obtained from using a time-series, cross-section data set pertaining to Israeli industry, We include a detailed list of heterogeneity controls in the specifications which substantially enhances the explanatory power of the models and contributes to our understanding of the nature of Israeli industry. Econometric problems which arise in attempting to estimate production and cost functions from panel data, such as sample selectivity, serial correlation due to unobserved firm effects, and endogeneity are addressed. A surprising finding is the relative inefficiency of large firms listed on the stock exchange. Histadrut and public firms appear to be poor performers in a number of dimensions. Large public firms are inefficient and pay excessively high wages. Small « 300 employees) public firms are not inefficient but pay excessive wages. Large Histadrut firms are inefficient while small Histadrut firms pay excessive wages. The wage structure in Israeli industry is seen to be systematically related to the heterogeneity controls used in this study. One productivity - related result is that firms experiencing higher than expected productivity also pay higher than expected wages, and about 70% of this productivity "bonus" appears as a wage rate increment.
Handle: RePEc:nbr:nberwo:4072
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Segmentation, Wage Dispersion and Unemployment
Author-Name: Kevin Lang
Author-Person: pla83
Author-Name: William T. Dickens
Note: LS
Number: 4073
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4073
File-URL: http://www.nber.org/papers/w4073.pdf
File-Format: application/pdf
Publication-Status: published as William Darity Jr., ed. Labor Economics: Problems in Analyzing Labor Markets. Norwell, MA: Kluwer Academic Publishers, 1993.
Abstract: This paper briefly reviews the empirical evidence on labor market segmentation and presents some new results on the similarity of the pattern of segmentation across 66 different countries. The paper goes on to consider how unemployment might be understood in a labor market segmentation framework. Existing models of unemployment in a dual labor market suggest that unemployment should be concentrated among those who are ultimately employed in high wage jobs. In fact, unemployment seems to be concentrated among workers who are more likely to be found in low wage jobs. This happens even though at least some workers find low wage jobs easy to obtain, We develop a segmented labor market model capable of explaining these facts and then explore its implications for the aggregate unemployment rate. We find that it fits well with the facts.
Handle: RePEc:nbr:nberwo:4073
Template-Type: ReDIF-Paper 1.0
Title: Global Financial Markets and the Risk Premium on U.S. Equity
Author-Name: K.C. Chan
Author-Name: G. Andrew Karolyi
Author-Person: pka329
Author-Name: Rene M. Stulz
Note: AP
Number: 4074
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4074
File-URL: http://www.nber.org/papers/w4074.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, (1992), p. 137-168
Abstract: We document that there is a significant foreign influence on the risk premium of U.S. assets. Using a bivariate GARCH-in-mean process for conditional expected excess returns, we find that the conditional expected excess return on U.S. stocks is positively related to the conditional covariance of the return of these stocks with the return on a foreign index but is not related to its own conditional variance. Further, we are unable to reject the international version of the CAPM. Evidence is presented for different model specifications, multiple-day returns and alternative proxies of foreign stock returns including the Nikkei 225 Stock Average, Morgan Stanley Japan and Morgan Stanley EAFE indices.
Handle: RePEc:nbr:nberwo:4074
Template-Type: ReDIF-Paper 1.0
Title: Bargaining Power, Strike Duration, and Wage Outcomes: An Analysis of Strikes in the 1880s
Author-Name: David Card
Author-Person: pca271
Author-Name: Craig A. Olson
Note: DAE LS
Number: 4075
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4075
File-URL: http://www.nber.org/papers/w4075.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 13, No. 1, pp. 32-61, January 1995.
Abstract: We study strike durations and outcomes for some 2000 disputes that occurred between 1881 and 1886. Most post-strike bargaining settlements in the 1880s fell into one of two categories: either a union "victory", characterized by a significant wage gain or hours cut, or a union "defeat", characterized by the resumption of work at the previous terms of employment. We find a strong negative relation between strike duration and the value of the settlement to workers. reflecting the declining probability of a union victory among longer strikes. For the subset of strikes over wage increases we estimate a structural model that includes equations for the capitulation times of the two parties and a specification of the wage increase conditional on a union victory. This framework provides a simple index of employees' relative bargaining power. based on the relative time to a union capitulation. Employees' relative bargaining power was higher in disputes involving fewer workers and in union ordered strikes. but substantially lower after the Haymarket Square incident in Chicago in 1886.
Handle: RePEc:nbr:nberwo:4075
Template-Type: ReDIF-Paper 1.0
Title: Government Solvency, Ponzi Finance and the Redundancy and Usefulness of Public Debt
Author-Name: Willem H. Buiter
Author-Person: pbu137
Author-Name: Kenneth M. Kletzer
Note: PE
Number: 4076
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4076
File-URL: http://www.nber.org/papers/w4076.pdf
File-Format: application/pdf
Publication-Status: published as "Uses and Limitations of Public Debt: Pouz: Finance, Dynamic Efficiency and Government Solvency", in H.VanEes and S.Brakman eds. Market Behaviour and Macreconomic Modelling, McGraw-Hill, 1997, pp. 275-307.
Abstract: We investigate how the ability of the government to depart from budget balance and issue debt expands the set of equilibria that can be supported using lump-sum tax-transfer instruments. We show how this depends on the restrictions that exist on the capacity to tax and make transfer payments, and what these restrictions imply for the government's ability to issue debt. Central to our analysis is the definition of solvency for an infinite-lived government in an infinite-lived economy with overlapping generations of finite-lived households. Our specification is derived from the demand for public debt by private agents and the non-negativity constraints on the capital stock and on private consumption by all generations. Under fairly tight restrictions on the government's tax-transfer menu, our solvency constraint implies the conventional solvency constraint. With unrestricted taxes and transfers Ponzi finance is always possible but 'inessential": it does not expand the set of equilibria that can be supported. Ponzi finance can be "essential" when taxes and transfers are restricted. The paper establishes a number of results that demonstrate how the government's ability to issue debt allows restricted tax-transfer schemes to support all equilibria attainable using unrestricted taxes and transfers
Handle: RePEc:nbr:nberwo:4076
Template-Type: ReDIF-Paper 1.0
Title: Russia and the Soviet Union Then and Now
Author-Name: Stanley Fischer
Note: EFG
Number: 4077
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4077
File-URL: http://www.nber.org/papers/w4077.pdf
File-Format: application/pdf
Publication-Status: published as The Transition in Eastern Europe Edited by Jean Blanchard, Kenneth A. Froot, and Jeffrey D. Sachs University of Chicago Press; Forthcoming 1993
Publication-Status: published as Russia and the Soviet Union Then and Now, Stanley Fischer. in The Transition in Eastern Europe, Volume 1, Country Studies, Blanchard, Froot, and Sachs. 1994
Abstract: The main focus of this paper is on the process and progress of economic reform in Russia. But I start with four historical questions that bear on the current situation. How advanced was Russia in 1913? What relevance, if any, does the New Economic Policy of the 19205, or NEP, have for the current situation? Why did economic growth in the Soviet Union slow in the 1970s and 1980s? What role did Gorbachev's policies play in bringing about the final collapse of the Soviet Union? Russia's approach to reform is similar to that in several East European countries. It differs in having started with a major price liberalization, before macroeconomic stabilization was assured. I then tum to the close links between macroeconomic stabilization and enterprise restructuring that have emerged in the Russian political process, and analyze the need for an explicit industrial restructuring policy that goes beyond privatization. The paper concludes with a discussion of the interrelated questions of inter-republican trade, payments, and new currencies. I describe and evaluate the case for an inter-republican payments union or the more modest type of organization, an inter-republican payments mechanism, that is likely to emerge.
Handle: RePEc:nbr:nberwo:4077
Template-Type: ReDIF-Paper 1.0
Title: Optimal Sanctions When the Probability of Apprehension Varies Among Individuals
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE
Number: 4078
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4078
File-URL: http://www.nber.org/papers/w4078.pdf
File-Format: application/pdf
Publication-Status: published as "Optimal Sanctions and Differences in Individuals' Likelihood of Avoiding Detecion," International Review of Law and Economics, vol. 13, pp 217-224 (1993)
Abstract: This paper explores how optimal enforcement is affected by the fact that not all individuals are equally easy to apprehend. When the probability of apprehension is the same for all individuals, optimal sanctions will be maximal: as Gary Becker (1968) suggested, raising sanctions and reducing the probability of apprehension saves enforcement resources. This argument necessarily holds only when the enforcement authority knows how difficult an individual will be to apprehend before expending any investigative resources. When differences among individuals exist and can be observed only after apprehension, or not at all, optimal enforcement may involve less than maximal sanctions.
Handle: RePEc:nbr:nberwo:4078
Template-Type: ReDIF-Paper 1.0
Title: Optimal Sanctions When Individuals are Imperfectly Informed About the Probability of Apprehension
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Louis Kaplow
Author-Person: pka44
Note: LE
Number: 4079
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4079
File-URL: http://www.nber.org/papers/w4079.pdf
File-Format: application/pdf
Publication-Status: published as The Journal of Legal Studies, Vol. XXI, No. 2, pp. 365-370 (June 1992).
Abstract: This paper considers optimal enforcement when individuals may be imperfectly informed about the probability of apprehension. When individuals are perfectly informed, optimal sanctions are maximal because, as Gary Becker (1968) suggested, society can economize on enforcement resources by reducing the probability of apprehension while increasing sanctions. But when individuals imperfectly observe the probability of apprehension, it may be optimal to apply lower sanctions while expending more enforcement resources.
Handle: RePEc:nbr:nberwo:4079
Template-Type: ReDIF-Paper 1.0
Title: Economic Exchange and Support Within U.S. Families
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: AG
Number: 4080
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4080
File-URL: http://www.nber.org/papers/w4080.pdf
File-Format: application/pdf
Abstract: This paper examines U.S. family exchange and support, its levels and trends. The paper points out the importance of demographics and geographic mobility in affecting the amount and form of family exchange. It then considers family economic exchange in the form of shared living. financial transfers, and the provision of time. Finally, it describes recent tests of family altruism and risk sharing. The paper paints a very pessimistic picture. Demographic, geographic, and economic pressures have taken their toll on U.S. families in recent years. While many Americans are members of extended families that are intact and in touch, a growing number of Americans have few extended family members on whom to rely. Family support in the form of shared living, financial assistance, and significant provision of time is increasingly becoming the exception, rather than the rule. Family economic assistance appears still to be available for many Americans in the case of dire emergencies, but short of such emergencies Americans are increasingly left to fend for themselves.
Handle: RePEc:nbr:nberwo:4080
Template-Type: ReDIF-Paper 1.0
Title: Innovation, Imitation, and Intellectual Property Rights
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 4081
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4081
File-URL: http://www.nber.org/papers/w4081.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, Vol. 61, Issue 6, November 1993 pp. 1247-1280
Abstract: The debate between the North and the South about the enforcement of intellectual property rights in the South is examined within a dynamic general equilibrium framework in which the North innovates new products and the South imitates them. A welfare evaluation of a policy of tighter intellectual property rights is provided by decomposing a region's welfare change into four components: terms of trade, production composition, available product choice and intertemporal allocation of consumption spending. The paper provides a theoretical evaluation of each one of these components and their relative size. The analysis proceeds in stages. It begins with an exogenous rate of innovation in order to focus on the first two components. The last two components are added by endogenizing the rate of innovation. Finally, the paper considers the role of foreign direct investment.
Handle: RePEc:nbr:nberwo:4081
Template-Type: ReDIF-Paper 1.0
Title: Central Bank Behavior and the Strategy of Monetary Policy: Observations From Six Industrialized Countries
Author-Name: Ben Bernanke
Author-Person: pbe55
Author-Name: Frederic Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 4082
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4082
File-URL: http://www.nber.org/papers/w4082.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier Jean and Stanley Fischer (eds.) NBER Macroeconomics Annual 1992. Cambridge, MA: MIT Press, 1992.
Publication-Status: published as Central Bank Behavior and the Strategy of Monetary Policy: Observations from Six Industrialized Countries, Ben Bernanke, Frederic Mishkin. in NBER Macroeconomics Annual 1992, Volume 7, Blanchard and Fischer. 1992
Abstract: Using a simple case study approach. this paper compares the conduct and performance of monetary policy in six Industrialized countries since the breakup of the Bretton Woods system. Our purpose is to develop fruitful hypotheses that might usefully be explored in subsequent, more formal research. From a positive perspective. a frequently observed pattern in the case studies is that central banks adopt money growth targets when inflation threatens to get out of control. Central banks appear to use money growth targets both as guideposts for assessing the stance of policy and as a means of signalling their intentions to the public; however. no central bank. adheres strictly to targets in the short run. More normatively. the case studies also suggest that money growth targets might be useful in providing a medium-term framework for monetary policy. if the targeting is done in a clear and straightforward manner and if targets can be adjusted for changes in the link between target and goal variables. It appears that rigid adherence to money growth targets in the short run is not necessary to gain some benefits of targeting, as long as there is some commitment by the central bank ultimately to reverse short-term deviations from target Finally. the choice of operating procedure seems to have little bearing on the success of policy
Handle: RePEc:nbr:nberwo:4082
Template-Type: ReDIF-Paper 1.0
Title: The Present Value Model of Rational Commodity Pricing
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: AP
Number: 4083
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4083
File-URL: http://www.nber.org/papers/w4083.pdf
File-Format: application/pdf
Publication-Status: published as The Economic Journal, Vol. 103, No. 418, pp. 511-530 (May 1993).
Abstract: The present value model relates an asset's price to the sum of its discounted expected future payoffs. I explore the limits of the model by testing its ability to explain the pricing of storable commodities. For commodities the payoff stream is the convenience yield that accrues from holding inventories, and it can be measured directly from spot and futures prices. Hence the model imposes restrictions on the joint dynamics of spot and futures prices, which I test for four commodities. I find close conformance to the model for heating oil, but not for copper or lumber, and especially not for gold. The pattern is the same for the serial dependence of excess returns, These results suggest that for three of the four commodities, prices at least temporarily deviate from fundamentals.
Handle: RePEc:nbr:nberwo:4083
Template-Type: ReDIF-Paper 1.0
Title: Risk Management: Coordinating Corporate Investment and Financing Policies
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: David S. Scharfstein
Author-Person: psc177
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF IFM
Number: 4084
Creation-Date: 1992-05
Order-URL: http://www.nber.org/papers/w4084
File-URL: http://www.nber.org/papers/w4084.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, December 1993, vol 48, 1629-1658
Publication-Status: published as The Theory of Corporate Finance, M.J. Brennan, from the series The International Library of Critical Writings in Financial Economcics, R. Roll, editor, 1995.
Abstract: This paper develops a general framework for analyzing corporate risk management policies. We begin by observing that if external sources of finance are more costly to corporations than internally generated funds, there will typically be a benefit to hedging: hedging adds value to the extent that it helps ensure that a corporation has sufficient internal funds available to take advantage of attractive investment opportunities. We then argue that this simple observation has wide-ranging implications for the design of risk management strategies. We delineate how these strategies should depend on such factors as shocks to investment and financing opportunities. We also discuss exchange-rate hedging strategies for multinationals. as well as strategies involving "nonlinear" instruments like options.
Handle: RePEc:nbr:nberwo:4084
Template-Type: ReDIF-Paper 1.0
Title: Cross-Country Patterns of Change in Relative Wages
Author-Name: Steven J. Davis
Author-Person: pda15
Note: EFG LS
Number: 4085
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4085
File-URL: http://www.nber.org/papers/w4085.pdf
File-Format: application/pdf
Publication-Status: published as Cross-Country Patterns of Change in Relative Wages, Steven J. Davis. in NBER Macroeconomics Annual 1992, Volume 7, Blanchard and Fischer. 1992
Abstract: This paper investigates movements in relative wages and wage inequality across thirteen of the world's major economies. Focusing on wages received by full-time male workers, the investigation uncovers several empirical regularities: (1) Most advanced industrialized economies show increases, often large. in wage inequality during the 19805; none show declining wage inequality. In contrast. three of four middle income countries considered here show sharply declining wage inequality during the 1980s. (2) Since the early to late 19705, the advanced economies show large and persistent increases in the wages of prime age men relative to the wages of less experienced men. (3) Following a period of sharply declining education differentials in the 1970s, the advanced economies show rising or flat education differentials after 1980. Education differentials fell moderately to sharply in the middle income countries during the 1980s. (4) Wage inequality among observationally similar workers rose sharply during the 1980s in most advanced economies. (5) After 1915, the structure of relative industry wages in the manufacturing sector became increasingly dissimilar across the advanced economies. However. controlling for common time effects, increases in international trade as a fraction of GOP are associated with a partial convergence of relative industry wage structures across countries. The paper discusses several alternative interpretations of wage structure developments in the United States and other countries in the light of these empirical regularities.
Handle: RePEc:nbr:nberwo:4085
Template-Type: ReDIF-Paper 1.0
Title: The International Transmission of Tax Policies in a Dynamic World Economy
Author-Name: Stephen J. Turnovsky
Author-Person: ptu5
Author-Name: Marcelo Bianconi
Author-Person: pbi3
Note: ITI
Number: 4086
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4086
File-URL: http://www.nber.org/papers/w4086.pdf
File-Format: application/pdf
Publication-Status: published as Review of International Economics, Vol. 1, Issue 1, pp. 49-72 (November 1992).
Abstract: This paper analyzes the international transmission of tax shocks in a two-country infinite-horizon representative agent framework. In analyzing such shocks, the viability of the underlying tax regimes, arising from the arbitrage conditions characterizing equilibrium in a perfect world capital market, is emphasized. Conditions for both short-run and long-run viability are derived, and the two polar regimes of source-based and residence-based taxation discussed. In general, we find the fanner more likely to satisfy the viability conditions, than the latter. With equity financing, the long-run viability of residence-based taxation is likely to require the harmonization of tax and/or dividend policy. The main features of the dynamic adjustment paths following a tax increase are characterized.
Handle: RePEc:nbr:nberwo:4086
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Segmentation Theory: Reconsidering the Evidence
Author-Name: William T. Dickens
Author-Name: Kevin Lang
Author-Person: pla83
Note: LS
Number: 4087
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4087
File-URL: http://www.nber.org/papers/w4087.pdf
File-Format: application/pdf
Publication-Status: Published as "Labor Market Segmentation and the Union Wage Premium", Review of Economics and Statistics, Vol. 70, no. 3 (1988): 527-530.
Abstract: We argue that Labor Market Segmentation theory is a good alternative to standard views of the labor market. Since it is sometimes argued that labor market segmentation theory is untestable, we first consider the uses of theory and the attributes of a good theory. We then argue that labor market segmentation has these attributes. It is internally consistent and is based on plausible assumptions about behavior and technology. More significantly, many of the predictions of the theory have been tested and confirmed. Further, from a dynamic view the theory has done quite well. When the theory has suggested new tests, far more often than not the predictions have been validated. Labor market segmentation theory has had to make little recourse to post-hoc explanations for unexpected empirical results. In contrast, human capital theory has required a series of post-hoc rationalizations to explain a large and growing body of empirical work motivated by the labor market segmentation perspective. Finally, we consider the implications of labor market segmentation theory for the practice of labor economics. We argue that further exploration of the implications of the theory for unemployment, trade. industrial policy and income distribution will provide useful insights and further tests of the theory.
Handle: RePEc:nbr:nberwo:4087
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing Explorations for Macroeconomics
Author-Name: John H. Cochrane
Author-Person: pco57
Author-Name: Lars Peter Hansen
Author-Person: pha303
Note: EFG AP
Number: 4088
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4088
File-URL: http://www.nber.org/papers/w4088.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier Jean and Stanley Fischer (eds.) NBER Macroeconomics Annual 1992. Cambridge, MA: MIT Press, 1992.
Publication-Status: published as Asset Pricing Explorations for Macroeconomics, John H. Cochrane, Lars Peter Hansen. in NBER Macroeconomics Annual 1992, Volume 7, Blanchard and Fischer. 1992
Abstract: In this paper we argue that financial data are a useful proving ground for macroeconomic models, and we explore the channels that link asset market data to such models. We use Hansen and Jagannathan's bounds on the mean and standard deviation of discount factors to survey several asset pricing puzzles. We then extend the bounds to reflect the correlation of discount factors with asset returns and to characterize conditional moments of discount factors. These characterizations help us to understand the behavior of a variety of models studied in the literature. We also incorporate borrowing constraints into the calculations. The borrowing constraints loosen the required properties of aggregate measurements of intertemporal marginal rates of substitution, but also sharpen the implications of asset market data for the marginal rates of substitution of unconstrained individuals.
Handle: RePEc:nbr:nberwo:4088
Template-Type: ReDIF-Paper 1.0
Title: Asymmetric Price Adjustment and Economic Fluctuations
Author-Name: Laurence Ball
Author-Person: pba605
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 4089
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4089
File-URL: http://www.nber.org/papers/w4089.pdf
File-Format: application/pdf
Publication-Status: published as The Economic Journal, The Journal of the Royal Economic Society, vol. 104,no. 423, March 1994, p. 247-261
Abstract: This paper considers a possible explanation for asymmetric adjustment of nominal prices. We present a menu-cost model in which positive trend inflation causes firms' relative prices to decline automatically between price adjustments. In this environment, shocks that raise firms' desired prices trigger larger price responses than shocks that lower desired prices. We use this model of asymmetric adjustment to address three issues in macroeconomics: the effects of aggregate demand, the effects of sectoral shocks, and the optimal rate of inflation.
Handle: RePEc:nbr:nberwo:4089
Template-Type: ReDIF-Paper 1.0
Title: Microeconomic Adjustment Hazards and Aggregate Dynamics
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Note: EFG
Number: 4090
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4090
File-URL: http://www.nber.org/papers/w4090.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, 108 (2), May 1993, 359-383.
Abstract: The basic premise of this paper is that understanding aggregate dynamics requires considering that agents are heterogeneous and that they do not adjust continuously to the shocks they perceive. We provide a general characterization of lumpy behavior at the microeconomic level in terms of an adjustment hazard function, that relates the probability that a unit adjusts to the deviation of its state variable from what would be its optimal level if frictions were momentarily removed. We argue that adjustment hazards that are eventually increasing with respect to the magnitude of this deviation are likely to be realistic. This allows for testable restrictions and a simple comparison with the partial adjustment model, which corresponds to the constant hazard case. We show how non-constant hazards - in particular, increasing hazards - generate non-linearities and history dependence in aggregate equations. We present an example based on U.S. Manufacturing employment and job flows, and find that increasing hazard models outperform partial adjustment models in describing aggregate employment dynamics; the improvement is most notorious during deep recessions and brisk expansions.
Handle: RePEc:nbr:nberwo:4090
Template-Type: ReDIF-Paper 1.0
Title: Price Rigidities, Asymmetries, and Output Fluctuations
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Note: EFG
Number: 4091
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4091
File-URL: http://www.nber.org/papers/w4091.pdf
File-Format: application/pdf
Publication-Status: Published as "Heterogeneity and Output Fluctuations in a Dynamic Menu-Cost Economy", Review of Economic Studies, Vol. 60, no. 202 (1993): 95-119.
Abstract: In this paper we characterize the average response of output to aggregate demand shocks in an economy where individual firms follow state-dependent pricing rules. We find that: (i) the average response of output to aggregate demand shocks decreases with core inflation and varies non-monotonically with aggregate uncertainty, (ii) there is an asymmetry in the response of output to aggregate demand expansions and contractions, which increases with core inflation and decreases with aggregate uncertainty, and (iii) this asymmetry also rises with the degree of asymmetry of aggregate demand shocks. Using annual data from 37 moderate-low inflation countries for the period 1960-1982, we find support for the basic implications of the model.
Handle: RePEc:nbr:nberwo:4091
Template-Type: ReDIF-Paper 1.0
Title: Ownership Structure and Corporate Performance in Japan
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Author-Name: George M. Pushner
Note: CF
Number: 4092
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4092
File-URL: http://www.nber.org/papers/w4092.pdf
File-Format: application/pdf
Publication-Status: published as Japan and the World Economy, vol. 6, (1994) pp. 239-261.
Abstract: This paper develops a dynamic continuous-time model in which international risk sharing can yield substantial welfare gains through its positive effect on expected consumption growth. The mechanism linking global diversification to growth is an attendant world portfolio shift from safe, but low-yield, capital into riskier, high-yield capital. The presence of these two types of capital is meant to capture the idea that growth depends on the availability of an ever-increasing array of specialized, hence inherently risky, production inputs. A partial calibration exercise based on Penn World Table consumption data implies steady-state welfare gains from global financial integration that for some regions amount to several times initial wealth.
Handle: RePEc:nbr:nberwo:4092
Template-Type: ReDIF-Paper 1.0
Title: Risk-Taking, Global Diversification, and Growth
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: EFG
Number: 4093
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4093
File-URL: http://www.nber.org/papers/w4093.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, December 1994
Abstract: This paper develops a dynamic continuous-time model in which international risk sharing can yield substantial welfare gains through its positive effect on expected consumption growth. The mechanism linking global diversification to growth is an attendant world portfolio shift from safe, but low-yield, capital into riskier, high-yield capital. The presence of these two types of capital is meant to capture the idea that growth depends on the availability of an ever-increasing array of specialized, hence inherently risky, production inputs. A partial calibration exercise based on Penn World Table consumption data implies steady-state welfare gains from global financial integration that for some regions amount to several times initial wealth.
Handle: RePEc:nbr:nberwo:4093
Template-Type: ReDIF-Paper 1.0
Title: International Adjustment with Habit-Forming Consumption: A Diagrammatic Exposition
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: ITI
Number: 4094
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4094
File-URL: http://www.nber.org/papers/w4094.pdf
File-Format: application/pdf
Publication-Status: published as Review of International Economics, Vol. 1, No. 1, pp. 32-48 (November 1992)
Abstract: This paper presents a simple diagrammatic analysis of an open economy's external adjustment process under habit-forming individual preferences. The exposition focuses on the consumption side and aims to make transparent the linkage among wealth, past consumption experience, and current consumption. An extension of the standard representative-agent model to a growing economy of overlapping generations completes the paper. Under habit formation an agent's consumption exhibits a form of hysteresis, in that his current consumption depends on his past consumption experience as well as initial assets. In the overlapping-generations model aggregate hysteresis disappears in the long run.
Handle: RePEc:nbr:nberwo:4094
Template-Type: ReDIF-Paper 1.0
Title: Sequencing and Welfare: Labor Markets and Agriculture
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: ITI
Number: 4095
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4095
File-URL: http://www.nber.org/papers/w4095.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, I. and A. Winters (eds.) Open Economies: Structural Adjustment and Agriculture. Cambridge: CEPR/Cambridge University Press, 1992.
Abstract: Recent discussions on structural adjustment and market-oriented reforms in developing and Eastern European nations have addressed the issue of the appropriate sequencing of these reforms. Most of the traditional work on the subject has concluded that the preferred sequencing should include, as a first step, the opening up of the trade account. This "trade account first" literature, however, has been mostly macroeconomics in nature, without explicitly exploring the microeconomics and welfare consequences of alternative sequencing strategies. In this paper I develop a formal intertemporal model to investigate the welfare effects of different reform sequences. More specifically, I analyze whether the "trade account first" recommendation can be backed theoretically by welfare considerations. The analysis focuses on the role of labor market distortions and of the agricultural sector. I find that there are very weak welfare-based arguments in favor of the "trade account first" sequencing. The analysis also suggests that an early reform of the labor market will generally be welfare improving.
Handle: RePEc:nbr:nberwo:4095
Template-Type: ReDIF-Paper 1.0
Title: Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: CF PR
Number: 4096
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4096
File-URL: http://www.nber.org/papers/w4096.pdf
File-Format: application/pdf
Abstract: The elasticity of investment and R&D investment with respect to cash flow is unambiguously positive in a large panel of U.S. manufacturing firms from 1973 to 1987. even with proper controls for permanent differences across firms and for simultaneity. I argue that the evidence favors liquidity constraints rather than just demand effects as the cause of this finding. Other results are that debt is not favored as a form of finance for R&D-intensive firms; leverage ratios and R&D investment are strongly negatively correlated across firms and this is not accounted for by differences in corporate taxation. Finally, the contemporaneous relationship between changes in debt levels and investment which I have previously documented (Hall 1990b and Hall 1991) is one of simultaneity, and apparently transitory, unlike the relationship between cash flow and investment.
Handle: RePEc:nbr:nberwo:4096
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Bankruptcy Reform
Author-Name: Philippe Aghion
Author-Person: pag175
Author-Name: Oliver Hart
Author-Person: pha222
Author-Name: John Moore
Author-Person: pmo265
Note: CF
Number: 4097
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4097
File-URL: http://www.nber.org/papers/w4097.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law, Economics, and Organization, vol. 8, no. 3, (October 1992), pp. 523-546
Publication-Status: published as The Economics of Bankruptcy Reform, Philippe Aghion, Oliver D. Hart, John Moore. in The Transition in Eastern Europe, Volume 2, Restructuring, Blanchard, , and Sachs. 1994
Abstract: We propose a new bankruptcy procedure. Initially, a firm's debts are cancelled, and cash and non-cash bids are solicited for the 'new" (all-equity) firm. Former claimants are given shares, or options to buy shares, in the new firm on the basis of absolute priority. Options are exercised once the bids are in. Finally, a shareholder vote is taken to select one of the bids. In essence, our procedure is a variant on the U.S. Chapter 7, in which non-cash bids are possible; this allows for reorganization. We believe our scheme is superior to Chapter 11 since it is simpler, quicker, market-based, avoids conflicts, and places appropriate discipline on management.
Handle: RePEc:nbr:nberwo:4097
Template-Type: ReDIF-Paper 1.0
Title: International Comparisons of Pricing-to-Market Behavior
Author-Name: Michael M. Knetter
Note: ITI
Number: 4098
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4098
File-URL: http://www.nber.org/papers/w4098.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, June 1993, pp. 423-436
Abstract: This paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using U.S., U.K., German and Japanese industry-level data. Given the industries sampled more price discrimination across destinations is observed in the U.K., German and Japanese data. For industries that match across source countries, however, behavior is very similar across source countries. Furthermore, destination-specific price adjustment on exports to the U.S. from Germany and Japan is similar to price adjustment observed on shipments to other destinations. Most variation in the data appears to be related to industry.
Handle: RePEc:nbr:nberwo:4098
Template-Type: ReDIF-Paper 1.0
Title: The Meaning of College in the Lives of American Women: The Past One-Hundred Years
Author-Name: Claudia Goldin
Author-Person: pgo601
Note: DAE LS
Number: 4099
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4099
File-URL: http://www.nber.org/papers/w4099.pdf
File-Format: application/pdf
Abstract: Three cohorts of college women are considered here. The first, graduating from 1900 to 1920, was faced with a choice of "family or career,? while the second, graduating from 1945 to the early 1960s, opted for family and employment serially - that is, "family then job." The third, graduating since 1980 in a climate of greater gender equality, is attempting both "family and career, " with mixed results and considerable frustration. This paper assesses the reasons for the changing set of tradeoffs each generation of college women faced and why the college education of women expanded in the post-World War II era. The first cohort attended college when the numbers of men and women in college were about equal, while the second attended college when the proportion of all undergraduates who were male was at an all-time high. Only half of the return to college for the second cohort came in the form of their B.A. degrees, while the other half came from their Mrs. degrees. Ironically, because the total return to college -- from the B.A. and Mrs. degrees -- was quite high, enrollments of women expanded rapidly and eventually gave rise to a demand for greater gender equality in the labor market and society.
Handle: RePEc:nbr:nberwo:4099
Template-Type: ReDIF-Paper 1.0
Title: Autos and the National Industrial Recovery Act: Evidence on Industry Complementarities
Author-Name: Russell Cooper
Author-Name: John Haltiwanger
Author-Person: pha231
Note: EFG
Number: 4100
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4100
File-URL: http://www.nber.org/papers/w4100.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 108, No. 4, 1993, pp. 1043-1071
Abstract: This paper investigates the motivations for, and implications of, the Automobile Industry code under the National Industrial Recovery Act. The amended code contained a provision calling for automobile producers to alter the timing of new model introductions and the annual automobile show as a means of regularizing employment in the industry. After documenting key features of the automobile industry during the 1920s and 1930s and outlining the provisions of the automobile code, we analyze two models of the annual automobile cycle to explain the observations. In one model, the NIRA code simply codified a change in industry behavior that would have taken place anyway due to a change in fundamentals in the economy during the early 1930s. The competing model introduces a coordination problem into the determination of the equilibrium timing of new model introductions. Our analysis of this period provides evidence against the hypothesis that changes in fundamentals led to the dramatic changes in the seasonal pattern of production and sales starting in 1935. Instead, it appears that the National Industrial Recovery Act succeeded in coordinating activity on an alternative equilibrium.
Handle: RePEc:nbr:nberwo:4100
Template-Type: ReDIF-Paper 1.0
Title: Hostile Takeovers and Expropriation of Extramarginal Wages: A Test
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Steven A. Sharpe
Note: LS
Number: 4101
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4101
File-URL: http://www.nber.org/papers/w4101.pdf
File-Format: application/pdf
Abstract: We construct a prediction model for testing the hypothesis that firms with employees earning extramarginal wages--perhaps owing to long-term implicit contracts-were more likely to experience hostile tender offers from 1979-1989. Firms on the Compustat (active) file in 1979 comprise the domain from which targets were identified. The 1980 Census of Population is used to estimate wage equations by two-digit (SIC) industry and extract both industry wage premia as well as age-earnings profiles and age distributions of employees by industry. Firm-level estimates of employee characteristics are then constructed using the Compustat breakdown of firm sales by industry segment. Finally, event probabilities are estimated using logit and multinomial logit models. Variables related to proxies for the magnitude of extramarginal wages payments, plus other firm characteristics such as the extent of diversification across industries, are found to raise the likelihood of being a hostile takeover target, relative to other corporate control events.
Handle: RePEc:nbr:nberwo:4101
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment as a Commitment Mechanism in the Presence of Managed Trade
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 4102
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4102
File-URL: http://www.nber.org/papers/w4102.pdf
File-Format: application/pdf
Publication-Status: published as International Economic Journal, vol. 10, no.4 (winter 1996): 1-28.
Abstract: The purpose of this paper is to evaluate the degree to which the threat of managed trade leads to foreign direct investment (FDI) in a time-consistent manner. We study the role of capital mobility in a two-countries world economy characterized by monopolistic competition. Investment decisions are implemented ex-ante, prior to the realization of productivity shocks. International trade among the countries is the outcome of either free or managed trade. An endogenous switch from free to managed trade may occur ex-post as the outcome of a cost-benefit assessment of the two countries. Under managed trade, the patterns of international commerce are determined as the outcome of costly bargaining. We identify time-inconsistent patterns of managed trade in the absence of capital mobility. Ex-post, one country will have the incentive to induce a switch to managed trade, the outcome of which is to reduce the expected welfare ex-ante. We demonstrate that capital mobility and the diversification of production achieved by the FDI alleviates this time inconsistency by reducing (potentially eliminating) the ex-post incentive of one country to switch to managed trade. Our analysis suggests that FDI induced by the threat of managed trade benefits ex-ante both the host country and the multinationals, explaining the relative tolerance toward FDI.
Handle: RePEc:nbr:nberwo:4102
Template-Type: ReDIF-Paper 1.0
Title: Inflation and Social Welfare in a Model With Endogenous Financial Adaptation
Author-Name: Federico Sturzenegger
Author-Person: pst825
Note: IFM ME
Number: 4103
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4103
File-URL: http://www.nber.org/papers/w4103.pdf
File-Format: application/pdf
Abstract: This paper develops a model with endogenous financial adaptation. With a representative agent, inflation and welfare increase upon introduction of financial adaptation. Once we allow for agents' heterogeneity, we can show that inflation still increases and that the "poor" are hurt, while the "rich" benefit from the process of financial adaptation. Finally, we consider the optimal level of seigniorage collection. With a representative agent, financial adaptation increases both the optimal level of government spending and the inflation rate. With heterogeneous agents, if the government cares for the low income group, the optimal amount of government spending falls even though the rate of inflation increases. The model accounts for many stylized facts of high inflation economies and explains the incentives behind many policy actions.
Handle: RePEc:nbr:nberwo:4103
Template-Type: ReDIF-Paper 1.0
Title: Time Nonseparability in Aggregate Consumption: International Evidence
Author-Name: Phillip A. Braun
Author-Person: pbr232
Author-Name: George M. Constantinides
Author-Person: pco144
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Note: AP
Number: 4104
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4104
File-URL: http://www.nber.org/papers/w4104.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, Vol. 37, no. 5 (1993): 897-920.
Abstract: We study consumption-based asset pricing models which allow for both habit persistence and durability of consumption goods. using quarterly consumption and asset return data for six countries. We estimate the parameters representing habit persistence or durability. risk version and time preference for each of the countries. We find that time-nonseparable preferences improve the fit of the model. When the nonseparability parameter is statistically significant. its magnitude indicates that the effect of habit persistence dominates the effect of durability in consumption expenditures. However. the international evidence for habit persistence is weaker than it is for the United States. The results indicate that the simple model of time nonseparability does not provide a satisfactory explanation of consumption and asset returns.
Handle: RePEc:nbr:nberwo:4104
Template-Type: ReDIF-Paper 1.0
Title: Output Fluctuations at the Plant Level
Author-Name: Timothy F. Bresnahan
Author-Person: pbr34
Author-Name: Valerie A. Ramey
Author-Person: pra154
Note: EFG
Number: 4105
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4105
File-URL: http://www.nber.org/papers/w4105.pdf
File-Format: application/pdf
Publication-Status: published as Bresnahan, Timothy F. and Valerie A. Ramey. "Output Fluctuations At The Plant Level," Quarterly Journal of Economics, 1994, v109(3), 593-624.
Abstract: This paper studies weekly output fluctuations from 1972 to 1983 at fifty final assembly plants in the U.S. automobile industry. The study makes use of a new data set that contains detailed information on plant operations. The main findings of the paper are: (1) Even at the simplest fabrication and assembly plant, there are a variety of margins on which production quantities are adjusted; (2) The production adjustment margins appear to have very different dynamic characteristics; and (3) The analysis of plant level data can lead to conclusions that are dramatically different from those reached using aggregated data, even though the data are driven by industry-wide shocks.
Handle: RePEc:nbr:nberwo:4105
Template-Type: ReDIF-Paper 1.0
Title: Male Jobs, Female Jobs, and Gender Gaps in Benefits Coverage
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Richard Chaykowski
Note: LS
Number: 4106
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4106
File-URL: http://www.nber.org/papers/w4106.pdf
File-Format: application/pdf
Publication-Status: published as Research in Labor Economics, Summer 1995
Abstract: Using contract-level data from the Canadian province of Ontario, we show that workers in predominately female bargaining units have more generous leave provisions but are less likely to have pension coverage than workers in similar predominantly male bargaining units. These differences persist when wages in the bargaining unit are controlled for. We explore the gender differences in pension coverage using a large cross-section of individual-level data and show that for women, lack of pension coverage is explained by gender gaps in wages and tenure which are themselves associated with marriage and child bearing. Finally, we assess the extent to which these findings are consistent with two alternative models of sex-segregation: Labor market discrimination, or a model in which segregation arises because women bear the chief responsibility for household production and tend to hold jobs which are compatible with that role.
Handle: RePEc:nbr:nberwo:4106
Template-Type: ReDIF-Paper 1.0
Title: Forecasting Nursing Home Utilization of Elderly Americans
Author-Name: Andrew Dick
Author-Name: Alan M. Garber
Author-Name: Thomas MaCurdy
Note: AG EH
Number: 4107
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4107
File-URL: http://www.nber.org/papers/w4107.pdf
File-Format: application/pdf
Publication-Status: published as Studies in the Economics of Aging, ed. David A. Wise, University of Chicago Press, 1994, p. 365
Publication-Status: published as Forecasting Nursing Home Utilization of Elderly Americans, Andrew Dick, Alan M. Garber, Thomas E. MaCurdy. in Studies in the Economics of Aging, Wise. 1994
Abstract: This paper describes the likelihood and duration of nursing home admissions experienced by Americans after age 65. Our analysis generates predictions for a representative population, not for one selected to be at high risk of institutionalization, and should therefore be of direct relevance to the design of long-term care policies.
Handle: RePEc:nbr:nberwo:4107
Template-Type: ReDIF-Paper 1.0
Title: Financial Market Efficiency Tests
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Robert J. Hodrick
Author-Person: pho115
Note: AP
Number: 4108
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4108
File-URL: http://www.nber.org/papers/w4108.pdf
File-Format: application/pdf
Publication-Status: published as M.H. Pesaran and M.R. Wickens, eds., Handbook of Applied Econometrics, Vol. 1, Macroeconomics, Basil Blackwell, 1996, pp. 415-458.
Abstract: This paper provides a selective survey of the voluminous literature on tests for market efficiency. The ideas discussed include standard autocorrelation tests, multi-period regression tests and volatility tests. The formulation and estimation of models for time-varying volatility are also considered. Dependence in second-order moments plays an important role in implementing and understanding tests for market efficiency. All of the reported test statistics and model estimates are calculated with monthly data on value-weighted NYSE stock prices and dividends. The distributions of the test statistics under various alternatives, including fads and bubbles, are illustrated through the use of Monte Carlo methods. In addition to the standard constant discount rate present value model, we postulate and simulate a new fundamental price relationship that accounts for the time-varying uncertainty in the monthly dividend growth rates. Allowing the discount rate to be a function of the time-varying uncertainty in the dividend process results in a simulated fundamental price series that is broadly consistent with most of the sample statistics of the actual data.
Handle: RePEc:nbr:nberwo:4108
Template-Type: ReDIF-Paper 1.0
Title: Race and School Quality Since Brown vs. Board of Education
Author-Name: Michael A. Boozer
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Shari Wolkon
Note: LS
Number: 4109
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4109
File-URL: http://www.nber.org/papers/w4109.pdf
File-Format: application/pdf
Publication-Status: published as Brookings Paper on Economic Activity: Microeconomics, 1992, pp. 269-326
Abstract: This paper presents evidence on the quality of schooling by race and ethnic origin in the United States. Although substantial racial segregation across schools exists, the average pupil-teacher ratio is approximately the same for black and white students. Hispanic students, however, on average have 10 percent more students per teacher. Relative to whites, blacks and Hispanics are less likely to use computers at school and at work. The implications of these differences in school quality for labor market outcomes are examined. We conclude by examining reasons for the increase in the black-white earnings gap since the mid-1970s.
Handle: RePEc:nbr:nberwo:4109
Template-Type: ReDIF-Paper 1.0
Title: Exact Solutions for Expected Rates of Return Under Markov Regime Switching: Implications for the Equity Premium Puzzle
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: AP
Number: 4110
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4110
File-URL: http://www.nber.org/papers/w4110.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, 26, 3, August 1994, Part I), pp. 345- 361
Abstract: This paper derives simple closed-form solutions for expected rates of return on stocks and riskless one-period bills under the assumption that shocks to the growth rates of consumption and dividends are generated by a Markov regime-switching process. These closed-form solutions are used to show that the Markov regime-switching process exacerbates the equity premium puzzle and the risk-free rate puzzle. Three empirical examples illustrate the magnitude of the effects of Markov regime switching on equilibrium expected returns.
Handle: RePEc:nbr:nberwo:4110
Template-Type: ReDIF-Paper 1.0
Title: Empirical Evidence for Collusion in the U.S. Auto Market?
Author-Name: Val Eugene Lambson
Author-Name: J. David Richardson
Note: ITI
Number: 4111
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4111
File-URL: http://www.nber.org/papers/w4111.pdf
File-Format: application/pdf
Abstract: A supergame theoretic price-setting model of collusion is calibrated to data from the North American passenger car market before, during, and after the voluntary restraint arrangements (VRAs) with Japan. Conclusions about whether the model is consistent with the bans from the various regimes depend on assumptions about market structure, demand elasticities, and discount factors. If one believes that the price elasticity of auto demand is about one, for example, then the calibrations suggest that in, the pre-VRA and VRA regimes, only General Motors and Ford could conceivably have colluded, and even this limited potential broke down in the post-VRA regime.
Handle: RePEc:nbr:nberwo:4111
Template-Type: ReDIF-Paper 1.0
Title: Making Sense of the Soviet Trade Shock in Eastern Europe: A Framework and Some Estimates
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI
Number: 4112
Creation-Date: 1992-06
Order-URL: http://www.nber.org/papers/w4112
File-URL: http://www.nber.org/papers/w4112.pdf
File-Format: application/pdf
Publication-Status: published as M. Blejer et. al. (ed.), Eastern Europe in Transition: From Recession to Growth?, Washington, D.C., The World Bank, 1993
Abstract: Eastern European countries have experienced sharp declines in real GDP since 1990. One of the reasons for this decline is the Soviet trade shock, deriving from the collapse of the CMEA and of traditional export markets in the Soviet Union. This paper is an attempt to quantify the magnitude of this external shock. A conceptual framework is developed to show that the shock has three distinct elements: (a) a terms of trade deterioration; (b) a market-loss effect; and (c) a removal-of-import-subsidy effect. Taking all three together, and also adding in Keynesian multiplier effects, the conclusion is that the Soviet trade shock accounts for all of the decline in Hungarian GDP, about 60 percent of decline in Czechoslovakia, and between a quarter and a third of the decline in Poland.
Handle: RePEc:nbr:nberwo:4112
Template-Type: ReDIF-Paper 1.0
Title: A Reconsideration of the Uncovered Interest Parity Relationship
Author-Name: Bennett T. McCallum
Note: ME IFM
Number: 4113
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4113
File-URL: http://www.nber.org/papers/w4113.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, vol. 33, (1994), pp 105-132
Abstract: The paper first presents reasons for viewing the uncovered interest-parity (VIP) relationship as more important, in terms of economic analysis, than the unbiasedness of forward rates as predictors of future spot exchange rates. The two hypotheses are closely related, so that test rejections of the latter tend to cast doubt on the former, but are not identical--so unbiasedness rejections are not conclusive for UIP. Next, some representative evidence is presented that pertains to alternative versions of the unbiasedness test. Although s[sub t] = [alpha] + ([beta]f[sub t- 1] + [epsilon, sub t] and s[sub t] - s[sub t-1] =[alpha] + [beta](f[sub t-1] ? s[sub t-1]) + [epsilon, sub t] are equivalent under the null hypothesis of [beta]= 1.0, they represent different classes of alternative hypotheses. Empirically, they give rise to extremely different outcomes, estimates of [beta] being very close to 1. 0 in the former equation but in the vicinity of -3.0 in the latter. In a generalized specification that includes both as special cases, the results strongly favor the second specification--thereby rejecting unbiasedness. Finally, three possible explanations for the [beta] = -3 result are considered and related to the UIP condition. Of these three, the latter two--one involving systematically irrational expectations and the other an additional relationship reflecting monetary policy behavior--are consistent with UIP. The policy-response hypothesis, that monetary authorities manage interest-rate differentials so as to resist rapid changes in exchange rates and in these differentials, is attractive conceptually and is capable of explaining not only the [beta] = -3 finding, but also several other notable features of the data.
Handle: RePEc:nbr:nberwo:4113
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Growth With New Inputs
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: James R. Markusen
Author-Person: pma528
Note: PR ITI
Number: 4114
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4114
File-URL: http://www.nber.org/papers/w4114.pdf
File-Format: application/pdf
Publication-Status: published as International Economic Review, May 1994, vol 35, no 2, pp 429-447
Abstract: In this paper we examine how to account for growth when new inputs are being created. In particular, we obtain a decomposition of growth into that due to a higher quantity of existing inputs, and that due to a greater range of inputs. This decomposition is first obtained for a single firm, with a CES production function. We then generalize to the GNP function of an economy. and again show how a decomposition of growth in GNP can be obtained. An example is presented of a two-sector economy, where new inputs are endogenously created each period, and a simple aggregate production function exists. Data for this economy are simulated, and the GNP function is estimated using various different measures of the factor inputs.
Handle: RePEc:nbr:nberwo:4114
Template-Type: ReDIF-Paper 1.0
Title: The Housing Wealth of the Aged
Author-Name: Louise Sheiner
Author-Name: David N. Weil
Author-Person: pwe24
Note: AG
Number: 4115
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4115
File-URL: http://www.nber.org/papers/w4115.pdf
File-Format: application/pdf
Abstract: This paper examines the degree to which the elderly reduce homeownership as they age, and the factors which influence this process. We find that average levels of homeownership decline significantly with age, even when cohort effects are taken into consideration, and that the amount of housing held by people near death is quite low compared to what is seen in cross sections. We estimate that 42% of households will leave behind a house when the last member dies. We also find that the degree to which households reduce homeownership between age 65 and death does not differ greatly between the upper and lower income halves of our sample; that people who do not have children reduce their homeownership more slowly than those who do; that increases in house prices in a state make it more likely that the elderly in that state reduce their home equity; and that the value of houses sold by elderly people tends not remain in their portfolios after the house is sold.
Handle: RePEc:nbr:nberwo:4115
Template-Type: ReDIF-Paper 1.0
Title: Trends in Expected Returns in Currency and Bond Markets
Author-Name: Martin D. Evans
Author-Person: pev5
Author-Name: Karen K. Lewis
Author-Person: ple1119
Note: AP IFM
Number: 4116
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4116
File-URL: http://www.nber.org/papers/w4116.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, vol. 37, June 1993, pp. 1005-1020
Abstract: Under conventional notions about rational expectations and market efficiency, expected returns differ from the actual expost returns by a forecast error that is uncorrelated with current information. In this paper, we describe how small departures from conventional notions of rational expectations and market efficiency can produce trends in excess returns. These trends are in addition to the trends typically found in the level of asset prices themselves. We report strong evidence for the presence of additional trends in excess foreign exchange and bond returns. We also estimate the additional trend component in excess returns on foreign exchange and find that it varied between -.8% and 1% for one month returns and between -6% and 8% for three month returns.
Handle: RePEc:nbr:nberwo:4116
Template-Type: ReDIF-Paper 1.0
Title: Towards a Reformulation of Monetary Theory: Competitive Banking
Author-Name: Joseph E. Stiglitz
Author-Name: Bruce Greenwald
Note: ME
Number: 4117
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4117
File-URL: http://www.nber.org/papers/w4117.pdf
File-Format: application/pdf
Abstract: This paper, after providing a critique of standard monetary theory based on the transactions demand for money, examines the effect of monetary policy (changes in reserve requires and open market operations) in a model with competitive, risk averse banks. The effects of changes in bank net worth and bank's risk perceptions are also analyzed. In deep recessions, monetary policy may be ineffective because banks are unwilling to lend. The effects of monetary policy are, at most, only partially mediated through changes in the interest rate. The implications for traditional IS-LM analysis are briefly noted.
Handle: RePEc:nbr:nberwo:4117
Template-Type: ReDIF-Paper 1.0
Title: The Carnegie Conjecture: Some Empirical Evidence
Author-Name: Douglas Holtz-Eakin
Author-Name: David Joulfaian
Author-Person: pjo3
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE LS
Number: 4118
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4118
File-URL: http://www.nber.org/papers/w4118.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. CVIII, pp. 413-436 (May 1993).
Abstract: This paper examines tax return-generated data on the labor force behavior of people before and after they receive inheritances. The results are consistent with Andrew Carnegie's century-old assertion that large inheritances decrease a person's labor force participation. For example, a single person who receives an inheritance of over $150,000 is roughly four times more likely to leave the labor force than a person with an inheritance below $25,000. Additional, albeit weaker, evidence suggests that large inheritances depress labor supply, even when participation is unaltered.
Handle: RePEc:nbr:nberwo:4118
Template-Type: ReDIF-Paper 1.0
Title: Traded Goods Consumption Smoothing and the Random Walk Behavior of the Real Exchange Rate
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: IFM
Number: 4119
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4119
File-URL: http://www.nber.org/papers/w4119.pdf
File-Format: application/pdf
Publication-Status: published as Monetary and Economic Studies 10, (Nov. 1992) 1-29 (Bank of Japan).
Abstract: Conventional explanations of the near random walk behavior of real exchange rates rely on near random walk behavior in the underlying fundamentals (e.g.. tastes and technology). The present paper offers an alternative rationale, based on a fixed-factor neoclassical model with traded and non-traded goods. The basic idea is that with open capital markets, agents can smooth their consumption of tradeables in the face of transitory traded goods productivity shocks. Agents cannot smooth non-traded goods productivity shocks, but if these are relatively small (as is often argued to be the case) then traded goods consumption smoothing will lead to smoothing of the intra-temporal price of traded and non-traded goods. The (near) random walk implications of the model for the real exchange rate are in stark contrast to the empirical predictions of the classic Balassa-Samuelson model. The paper applies the model to the yen/dollar exchange rate over the floating rate period.
Handle: RePEc:nbr:nberwo:4119
Template-Type: ReDIF-Paper 1.0
Title: Race and Gender Pay Differentials
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: LS
Number: 4120
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4120
File-URL: http://www.nber.org/papers/w4120.pdf
File-Format: application/pdf
Publication-Status: published as "Race and Gender Pay Differentials" in Research Frontiers in Industrial Relations, edited by David Lewin, Olivia Mitchell and Peter Sherer, Madison, W I: Industrial Relations Research Association, 1992
Abstract: In this paper we review research findings from the 1980s and early 1990s on race and gender pay gaps. In addition. we present some evidence from the Current Population Surveys (1972, 1982 and 1989) regarding the impact of shifts in the industrial composition of employment and in interindustry wage differentials on these gaps. The gender gap in pay was stable in the 1970s but fell steadily in the 1980s; the opposite patterns were observed for black-white wage differentials--a trend towards convergence in the 1970s and stability in the 1980s. Understanding these new trends comprised the unifying theme of our review. Existing studies suggest that changes in wage structure. changing relative skill levels by race and sex. and. possibly. changes in the implementation of government policies all played a role in producing the observed outcomes. although impacts were sometimes countervailing. Our own results indicate that total industry effects (representation plus coefficient effects) had little impact on the male-female pay gap during the 1970s. but accounted for a small portion of the closing of the male-female pay gap for both blacks and for whites in the 1980s. In contrast, we found no evidence that total industry effects contributed to black-white wage trends in either period.
Handle: RePEc:nbr:nberwo:4120
Template-Type: ReDIF-Paper 1.0
Title: Rational Asset Price Movements Without News
Author-Name: David Romer
Author-Person: pro406
Note: AP
Number: 4121
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4121
File-URL: http://www.nber.org/papers/w4121.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol 83, (5), pp. 1112-1130 (December 1993)
Abstract: This paper argues that an important part of movements in asset prices may be caused by neither external news nor irrationality, but the by revelation of information by the trading process itself. Two models are developed that illustrate this general idea. One model is based on investor uncertainty about the quality of other investors' information: the other is based on widespread dispersion of information and small costs to trading. The analysis is used to suggest a possible rational explanation of the October 1987 crash.
Handle: RePEc:nbr:nberwo:4121
Template-Type: ReDIF-Paper 1.0
Title: Public-Sector Capital and the Productivity Puzzle
Author-Name: Douglas Holtz-Eakin
Note: PE
Number: 4122
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4122
File-URL: http://www.nber.org/papers/w4122.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 76, No. 1, 1994, pp. 12-21.
Abstract: A number of studies have suggested a quantitatively important relationship between public-sector capital accumulation and private sector productivity, with the most compelling evidence derived from analyses of state-level data. Estimates herein of production functions that use standard techniques to control for unobserved, state-specific characteristics, however, reveal essentially no role for public-sector capital in affecting private sector productivity. Only estimates of state production functions that do not include such controls find substantial productivity impacts. This result reconciles existing econometric estimates with the findings of Hulten and Schwab based on growth accounting techniques, as such techniques effectively control for state-specific effects. Region-level estimates are essentially identical to those from state data, suggesting no quantitatively important spillover effects across states.
Handle: RePEc:nbr:nberwo:4122
Template-Type: ReDIF-Paper 1.0
Title: Markup Adjustment and Exchange Rate Fluctuations: Evidence From Panel Data on Automobile Exports
Author-Name: Joseph E. Gagnon
Author-Person: pga415
Author-Name: Michael M. Knetter
Note: IFM ITI
Number: 4123
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4123
File-URL: http://www.nber.org/papers/w4123.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, April 1995, pp. 289-310
Abstract: This paper uses bilateral automobile export unit values from the United States, Germany and Japan to measure the importance of markup adjustment that is associated with exchange rate changes across export destination markets. Japanese auto export prices exhibit a high degree of markup adjustment that has the effect of stabilizing prices in units of the buyer's currency. There is weak evidence of this behavior in German auto exports and none for U.S. auto exports. Where it exists, markup adjustment is very persistent, not merely a short run phenomenon. The dynamic pattern of adjustment is consistent with invoicing in the exporter's currency, except for exports to the United States and Canada.
Handle: RePEc:nbr:nberwo:4123
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment in the U.S.: Changes Over Three Decades
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 4124
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4124
File-URL: http://www.nber.org/papers/w4124.pdf
File-Format: application/pdf
Publication-Status: published as "Foreign Direct Investment" edited by Kenneth A. Froot, pp. 113-170, Chicago. IL: University of Chicago Press, 1993.
Publication-Status: published as Foreign Direct Investment in the United States: Changes over Three Decades, Robert E. Lipsey . in Foreign Direct Investment, Froot. 1993
Abstract: U.S. direct investment inflows in the 1980s were almost half the world's total. Even this large inflow leaves foreign firms employing less than 5 per cent of the U.S. labor force, but twice that share in manufacturing. That increase is related to the internationalization of production by foreign firms more than to competitive weakness of U.S. firms. Foreign affiliates import more relative to their exports than U.S. firms but are moving closer to the behavior of U.S. firms. The trade balances of both are sensitive to exchange rates. The financing of foreign direct investment from retained earnings dropped almost to zero in the 1980s. One reason is the rapid growth of this investment and another is its low profitability.
Handle: RePEc:nbr:nberwo:4124
Template-Type: ReDIF-Paper 1.0
Title: Robin-Hooding Rents: Exploiting the Pecuniary Effects of In-Kind Programs
Author-Name: Richard Zeckhauser
Author-Person: pze7
Author-Name: Steve Coate
Author-Person: pco66
Author-Name: Stephen Johnson
Note: PE
Number: 4125
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4125
File-URL: http://www.nber.org/papers/w4125.pdf
File-Format: application/pdf
Abstract: The pecuniary effects of cash and in-kind programs differ. A program that builds housing for the poor, for example, is likely to result in a lower price of existing low-income housing than would an equally costly cash transfer program. Low-income renters in general would benefit; landlords would lose. The process we label Robin-Hooding rents employs in-kind programs to transfer rents from one group in society to another, Direct taxation of "donor" groups may be infeasible because their incomes can't be monitored, they are engaged in illegal activities, they are foreign, or the government's administrative apparatus is ineffective. A general equilibrium analysis reveals that absent the ability to target taxation, Robin-Hooding may be a valuable second-best transfer instrument. Robin-Hooding also has drawbacks, Its incentive effects are significant, for today's rents flow from yesterday's investment activities. Moreover, even when Robin-Hooding is undesirable, parochial government agencies may be tempted to employ it as a means to escape the scrutiny of the budget process. The real world use of Robin-Hooding in both developed and developing nations is discussed.
Handle: RePEc:nbr:nberwo:4125
Template-Type: ReDIF-Paper 1.0
Title: The Savings of Ordinary Americans: The Philidelphia Saving Fund Society in the Mid-Nineteenth Century
Author-Name: George Alter
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Elyce Rotella
Note: DAE
Number: 4126
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4126
File-URL: http://www.nber.org/papers/w4126.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic History, December 1994.
Abstract: We explore the savings behavior and saving rates of ordinary Americans through their accounts at the Philadelphia Saving Fund Society. the oldest mutual savings bank in the United States founded in 1816 to encourage thrift among the working poor. Our sample contains the 2.374 accounts opened in 1850. of which one-quarter were linked to the 1850 census manuscripts. Savings accounts were generally brief affairs; only 30 percent lasted more than 5 years. But median balances mounted to about three-quarters of annual income in about three to four years. Deposits and withdrawals were infrequent. but substantial. The median deposit was about 1 to 2 months of gross income whereas the median withdrawal represented about 2 to 3 months but occurred far less often. Account holders. then. did not generally use their accounts for the short-run fluctuations in income we suspect they experienced. Only female servants. as a group. used their accounts for life-cycle savings eventually amassing large nest eggs through steady but slow accumulation. Men often used their accounts to hold funds on route to acquiring physical property. Estimated saving rates range from a low of 12 percent to a more sensible one of 21 percent among only active accounts.
Handle: RePEc:nbr:nberwo:4126
Template-Type: ReDIF-Paper 1.0
Title: International Transmission Under Bretton Woods
Author-Name: Alan C. Stockman
Author-Person: pst94
Note: IFM
Number: 4127
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4127
File-URL: http://www.nber.org/papers/w4127.pdf
File-Format: application/pdf
Publication-Status: published as A Retrospective on Bretton Woods, Michael Bordo and Barry Eichengreen Eds., Chicago, IL: University of Chicago Press, 1993.
Publication-Status: published as International Transmission under Bretton Woods, Alan C. Stockman. in A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, Bordo and Eichengreen. 1993
Abstract: This paper explores the main channels of international transmission of economic disturbances under the Bretton Woods System and presents evidence on the short-run international transmission of inflation under that system. There appears to have been little short-run international transmission of inflation. Countries with one-percent higher money-growth rates subsequently had one-fourth to one-half percent higher inflation and a (predictably) lower real interest rate. This probably reflects effects of money growth on inflation and interest rates rather than reverse causation: the natural interpretation of the evidence is that countries had some scope for monetary-policy independence under Bretton Woods, despite pegged exchange rates, and exercised that independence in ways that limited international transmission.
Handle: RePEc:nbr:nberwo:4127
Template-Type: ReDIF-Paper 1.0
Title: Office Market Values During the Past Decade: How Distorted Have Appraisals Been?
Author-Name: Patric Hendershott
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 4128
Creation-Date: 1992-07
Order-URL: http://www.nber.org/papers/w4128
File-URL: http://www.nber.org/papers/w4128.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Real Estate Economics, vol. 23, (Summer 1995), pp. 101-116.
Abstract: This paper develops evidence that, in a declining market, appraisal values may lag notably behind analytical measures of the discounted present value of commercial property cash flows. For the period 1982-92, alternative measures of the economic value of constant-quality office buildings are constructed using two benchmark projections designed to bracket expected future vacancy rates and real rents. Until 1992, the time path for both benchmark series lie consistently below that developed from the appraisal-based Russell/NCREIF office market index. This divergence implies that the rate of price appreciation reported by the Russell/NCREIF index is distorted: being slow to register price declines when markets first weaken and then having to overstate the rate of decline once the market begins to bottom out. The distortion may reflect incentives for investment managers and appraisers to smooth potentially temporary price volatility, as well as systematic differences in the character and condition of the properties that tend to trade at different stages of the real estate cycle.
Handle: RePEc:nbr:nberwo:4128
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Effects, Monetary Policy, and the Business Cycle
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Note: ME
Number: 4129
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4129
File-URL: http://www.nber.org/papers/w4129.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, vol. 27, no. 4, November 1995 Part I pp 1113-1136
Abstract: This paper presents new empirical evidence to support the hypothesis that positive money supply shocks drive short-term interest rates down. We then present a quantitative, general equilibrium model which is consistent with the hypothesis. The two key features of our model are that (i) money shocks have a heterogeneous impact on agents and (ii) ex post inflexibilities in production give rise to a very low short-run interest elasticity of money demand. Together, these imply that, in our model, a positive money supply shock generates a large drop in the interest rate comparable in magnitude to what we find in the data. In sharp contrast to sticky nominal wage models, our model implies that positive money supply shocks lead to increases in the real wage. We report evidence that this is consistent with the U.S. data. Finally, we show that our model can rationalize a version of the Real Bills Doctrine in which the monetary authority accommodates technology shocks, thereby smoothing interest rates.
Handle: RePEc:nbr:nberwo:4129
Template-Type: ReDIF-Paper 1.0
Title: Inter-Industry Mobility and the Cyclical Upgrading of Labor
Author-Name: Mark Bils
Author-Person: pbi148
Author-Name: Kenneth J. McLaughlin
Note: LS EFG
Number: 4130
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4130
File-URL: http://www.nber.org/papers/w4130.pdf
File-Format: application/pdf
Publication-Status: published as McLaughlin, Kenneth J & Bils, Mark, 2001. "Interindustry Mobility and the Cyclical Upgrading of Labor," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 94-135, January.
Abstract: We investigate whether a market-clearing model of the labor market is consistent with the cyclical upgrading of labor: workers tend to move to higher paying industries in expansions and to lower paying industries in contractions. By applying Roy's (1951) model of self-selection to industry fluctuations, we show that cyclical upgrading can be consistent with market clearing. Applying the model to inter-industry mobility patterns in panel data, we find data of substantial selection by comparative advantage. However, the panel data reveal a selection process that is consistent with cyclical upgrading. Thus the model does not simultaneously account for interindustry mobility in panel data and cyclical upgrading.
Handle: RePEc:nbr:nberwo:4130
Template-Type: ReDIF-Paper 1.0
Title: Host Country Competition and Technology Transfer by Multinationals
Author-Name: Magnus Blomstrom
Author-Person: pbl88
Author-Name: Ari Kokko
Author-Person: pko5
Author-Name: Mario Zejan
Note: ITI
Number: 4131
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4131
File-URL: http://www.nber.org/papers/w4131.pdf
File-Format: application/pdf
Publication-Status: published as Weltwirtschaftliches Archiv, Review of World Economics, Band 130, Heft 3pp. 521-533, (1994)
Abstract: This paper examines whether rivalry in host country markets may force multinational films to increase the technology transfer to their foreign affiliates. Such technology flows should be interesting from the perspective of the host country and its firms, since they would increase the potential for "spillovers". Using detailed (unpublished) industry data from Mexican manufacturing industry we find that indicators for local competition are positively related to the technology imports of foreign owned affiliates. The effects appear to be strong in consumer goods industries, which suggest that foreign multinationals are especially sensitive to the local market environment when barriers to entry in the form of complex technology or high capital requirements are relatively low.
Handle: RePEc:nbr:nberwo:4131
Template-Type: ReDIF-Paper 1.0
Title: What Explains Developing Country Growth?
Author-Name: Magnus Blomstrom
Author-Person: pbl88
Author-Name: Robert E. Lipsey
Author-Person: pli259
Author-Name: Mario Zejan
Note: EFG ITI
Number: 4132
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4132
File-URL: http://www.nber.org/papers/w4132.pdf
File-Format: application/pdf
Publication-Status: published as "What Explains the Growth of Developing Countries" in William Baumol, Richard Nelson and Edward Wolff, eds., Convergence and Productivity: Cross-National Studies and Historical Evidence, Oxford, Oxford University Press, 1994
Abstract: Among developing countries, there was no gross relationship between real income per capita in 1960 and subsequent growth in per capita income. However, once other significant influences, such as education, changes in labor force participation rates, inflows of foreign investment, price structures, and fixed investment ratios are taken into account, the lower the 1960 income level, the faster the income growth. This "conditional" convergence was particularly strong among the poorest half of the developing countries, contradicting the idea of a "convergence club" confined to relatively well-off countries. Inflows of direct investment were an important influence on growth rates for higher income developing countries, but not for lower income ones. For the latter group, secondary education, changes in labor force participation rates, and initial distance behind the United States were all major factors.
Handle: RePEc:nbr:nberwo:4132
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Nicolas Williams
Author-Person: pwi213
Note: LS
Number: 4133
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4133
File-URL: http://www.nber.org/papers/w4133.pdf
File-Format: application/pdf
Publication-Status: published as Altonji, Joseph G. and Nicolas Williams. "The Effects of Labor Market Experience, Job Seniority and Mobility on Wage Growth." Research in Labor Economics 17 (1998): 233-276.
Abstract: This paper studies the returns to seniority, the returns to experience, and the effects of seniority and experience at the time of a quit or layoff on changes in the job match specific component of wages. We show that these returns are not identified in widely used regression models that relate the wage changes of stayers, quits, and layoffs to tenure and experience. We deal with the identification of problems in two ways. First, we obtain theoretical bounds on key unidentified parameters using a simple model of wages and mobility. Second, we check the implications of assumptions about the linear tenure slope for the estimates of the returns to tenure, experience, and the effect of tenure on job match gains. We have three main empirical findings. First, there is a large return to general labor market experience that is independent of job shopping. Second, the return to tenure is probably above the Altonji and Shakotko's (1987) estimate but far below OLS estimates. Third, quits results in substantial job match gains for inexperienced workers. Layoffs are associated with the substantial job match losses for workers who have been on the job for over a year.
Handle: RePEc:nbr:nberwo:4133
Template-Type: ReDIF-Paper 1.0
Title: Do Expected Shifts in Inflation Policy Affect Real Rates?
Author-Name: Karen K. Lewis
Author-Person: ple1119
Author-Name: Martin D. Evans
Author-Person: pev5
Note: AP ME
Number: 4134
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4134
File-URL: http://www.nber.org/papers/w4134.pdf
File-Format: application/pdf
Publication-Status: published as "Do Expected Shifts in Inflation Affect Estimates of the Long-Run Fischer Relation? Journal of Finance, March 1995, vol.50, pp.225-253.
Abstract: This paper presents a new explanation for the negative correlation between ex post real interest rates and inflation found in earlier empirical studies. We begin by showing that there is a strong negative correlation between the permanent movements in ex post real interest rates and inflation. We argue that such a correlation can arise when people incorporate anticipated shifts in inflation policy into their expectations. Under these circumstances, a shift to lower (higher) inflation will lead to systematically higher (lower) ex post real rates. Using new time series techniques we are able to reject the hypothesis that nominal interest rates were unaffected by anticipated switches in inflation policy in the post-war era. To evaluate the impact of these switches, we then calculate the effects of inflationary expectations upon real rates using a Markov switching model of inflation. Inflation forecasts based upon the estimates of this rational model behave similarly to inflation forecasts from the Livingston survey. When ex ante real interest rates are identified with the Markov models of inflation, we find that ex ante real interest rate does not contain permanent shocks, nor is it related to permanent shocks in inflation.
Handle: RePEc:nbr:nberwo:4134
Template-Type: ReDIF-Paper 1.0
Title: Does Executive Compensation Affect Investment?
Author-Name: Kevin J. Murphy
Author-Person: pmu108
Author-Name: Robert Gibbons
Author-Person: pgi283
Note: CF LS
Number: 4135
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4135
File-URL: http://www.nber.org/papers/w4135.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Applied Corporate Finance, Vol. 5, No. 2, pp. 99-109 (Summer 1992)
Abstract: Investment decisions require trading off current expenditures against future revenues. If revenues extend far enough into the future, the executives responsible for designing long-run investment policy may no longer be in office by the time all the revenues are realized. We present evidence that: (1) on average, executives are close to leaving office (relative to the payout period of many investments); (2) bonuses based on accounting earnings constitute an important part of compensation for the typical executive; and (3) executives respond in predictable ways to compensation plans based on accounting measures of earnings. Based on these facts, we hypothesize that existing compensation policy induces executives to reduce investments during their last years in office. In our empirical work, however, we find that investment expenditures on research and development and on advertising tend to be largest in the final years of a CEO's time in office. We offer several possible explanations for this surprising finding
Handle: RePEc:nbr:nberwo:4135
Template-Type: ReDIF-Paper 1.0
Title: Arbitration in International Trade
Author-Name: Alessandra Casella
Author-Person: pca496
Note: ITI
Number: 4136
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4136
File-URL: http://www.nber.org/papers/w4136.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, January 1996.
Abstract: The great majority of international contracts provides that any disputes which may arise will be decided by arbitration. Legal scholars argue that international arbitration is leading to the development of legal doctrine attuned to the needs of business and independent of national laws. This paper studies international arbitration as a beautiful example of the role of private trade in shaping international institutions. We review the provisions and the practice of international arbitration, and present a general equilibrium model of the relationship between the expansion of trade and the adoption of arbitration. The model focuses on the heterogeneity existing among economic agents in terms of their legal needs. It shows how arbitration alters the size and composition of markets, while at the same time responding to exogenous change in trade. In addition, it shows how the legal services provided by the courts deteriorate in the presence of arbitration and predicts that the share of traders using arbitration should rise as markets expand. Overall, the model does remarkably well in generating results commonly discussed in the legal literature.
Handle: RePEc:nbr:nberwo:4136
Template-Type: ReDIF-Paper 1.0
Title: Wealth Mobility in America: A View from the National Longitudinal Survey
Author-Name: Richard H. Steckel
Author-Person: pst352
Author-Name: Jayanthi Krishnan
Note: DAE LS
Number: 4137
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4137
File-URL: http://www.nber.org/papers/w4137.pdf
File-Format: application/pdf
Abstract: We depict and analyze wealth mobility in a national sample of nearly 4,000 households interviewed by the National Longitudinal Survey over a ten year period from the mid 1960s to the mid 1970s. A transition matrix, the Shorrocks measure, average decile position for various subgroups, and wealth in period two compared with wealth in period one are used to describe patterns of wealth mobility. These results and regression models of change in percentile position, of persistence in the top, of movement into the top, of persistence into the bottom, and of movement into the bottom identify winners and losers. The losers include single people, blacks, and those who experienced marital disruption, while winners were the skilled and more educated. These findings have implications for the interpretation of cross-sectional measures of inequality, the explanation of long-term trends in wealth mobility, and the consequences of recent trends in the wage structure.
Handle: RePEc:nbr:nberwo:4137
Template-Type: ReDIF-Paper 1.0
Title: Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?
Author-Name: Severin Borenstein
Author-Person: pbo78
Author-Name: A. Colin Cameron
Author-Person: pca565
Note: IO
Number: 4138
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4138
File-URL: http://www.nber.org/papers/w4138.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, February 1997, vol.112, no.1, pp.305-339.
Abstract: Our empirical investigation confirms the common belief that retail gasoline prices react more quickly to increases in crude oil prices than to decreases. Nearly all of the response to a crude oil price increase shows up in the pump price within 4 weeks, while decreases are passed along gradually over 8 weeks. The asymmetry could indicate market power of some producers or distributors, or it could result from inventory adjustment costs. By analyzing price transmission at different points in the distribution chain we investigate these theories. We find that some asymmetry occurs at the level of the competitive spot market for gasoline, perhaps reflecting inventory costs. Wholesale gasoline prices, however, exhibit no asymmetry in responding to crude oil price changes, indicating that refiners who set wholesale prices are not the source of the asymmetry. The most significant asymmetry appears in the response of retail prices to wholesale price changes. We argue that this probably reflects short run market power among retail gasoline sellers.
Handle: RePEc:nbr:nberwo:4138
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Interest Rates on Tax-Exempt Hospital Bonds
Author-Name: Fred Goldman
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Susan W. Nesbitt
Author-Name: Pamela Mobilia
Note: EH
Number: 4139
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4139
File-URL: http://www.nber.org/papers/w4139.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, vol, 12 (1993), pp. 385-410.
Abstract: The aim of this paper is to examine the determinants of interests rates on tax-exempt hospital bonds. The results highlight the potential and actual roles of Federal and state policy in the determination of these rates. The shift to a Prospective Payment System under Medicare has subsidized the borrowing costs of some hospitals at the expense of others. The selection of underwriters by negotiation rather than by competitive bidding results in higher interest rates. It is cheaper for hospitals in states with relatively high income tax rates to issue debt. The Federal tax act of 1986 raised the cost of hospital debt by encouraging bond issues to contain call features. Are the interest rate effects associated with these policies desirable or undesirable? This question can not be answered in the absence of estimates of the optimal subsidy that an average hospital should receive via its participation in tax-exempt markets, how this subsidy should vary among hospitals with different characteristics, and how the welfare costs associated with this subsidy can be minimized. Our results do not contain these estimates but they underscore that the differentials at issue are substantial.
Handle: RePEc:nbr:nberwo:4139
Template-Type: ReDIF-Paper 1.0
Title: Global Versus Country-Specific Productivity Shocks and the Current Account
Author-Name: Reuven Glick
Author-Person: pgl13
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: IFM ITI
Number: 4140
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4140
File-URL: http://www.nber.org/papers/w4140.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics 35 (February 1995), pp 159-192.
Abstract: The intertemporal approach to the current account is often regarded as theoretically elegant but of limited empirical significance. This paper derives highly tractable current account and investment specifications that we estimate without resorting to calibration or simulation methods. In time-series data for eight industrialized countries, we find that country-specific productivity shocks tend to worsen the current account, whereas global shocks have little effect. Both types of shock raise investment. It is a puzzle, however, for the intertemporal model that long-lasting local productivity shocks have a larger impact effect on investment than on current account.
Handle: RePEc:nbr:nberwo:4140
Template-Type: ReDIF-Paper 1.0
Title: Three Perspectives on the Bretton Woods System
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: IFM
Number: 4141
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4141
File-URL: http://www.nber.org/papers/w4141.pdf
File-Format: application/pdf
Publication-Status: published as Barry Eichengreen, 1993. "Epilogue: Three Perspectives on the Bretton Woods System," NBER Chapters, in: A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform, pages 621-658 National Bureau of Economic Research, Inc.
Publication-Status: published as Retrospective on the Bretton Woods System Eds. Michael Bordo and Barry Eichengreen UCP 1993
Abstract: The twenty years that have passed since the collapse of the Bretton Woods System provide sufficient distance to safely assess the operation of the post-World War II international monetary system. This paper considers the history and historiography of Bretton Woods from three perspectives. First, I ask how the questions posed today about the operation of Bretton Woods differ from those asked twenty years ago. Second, I explore how today's answers to familiar questions differ from the answers offered in the past. Third, I examine the implications of Bretton Woods experience for international monetary reform.
Handle: RePEc:nbr:nberwo:4141
Template-Type: ReDIF-Paper 1.0
Title: The Effects of High School Curriculum on Education and Labor Market Outcomes
Author-Name: Joseph G. Altonji
Author-Person: pal266
Note: LS
Number: 4142
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4142
File-URL: http://www.nber.org/papers/w4142.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 30, No. 3, Summer 1995, pp. 409-438
Abstract: There is much public discussion but almost no evidence on the effects of high school curriculum on postsecondary education and on success in the labor market. I use the large variation in curriculum across US high schools to identify the effects on wages and educational attainment of specific courses of study. The main finding is that the return to additional courses in academic subject is small. One cannot account for the value of a year of high school with estimates of the value of the courses taken by the typical student during the year.
Handle: RePEc:nbr:nberwo:4142
Template-Type: ReDIF-Paper 1.0
Title: Estimates of the Economic Return to Schooling from a New Sample of Twins
Author-Name: Alan Krueger
Author-Person: pkr63
Author-Name: Orley Ashenfelter
Author-Person: pas9
Note: LS
Number: 4143
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4143
File-URL: http://www.nber.org/papers/w4143.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, December 1994, pp. 1157-1173.
Abstract: This paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels. Multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling. The data indicate that omitted ability variables do not bias the estimated return to schooling upward, but that measurement error does bias it downward. Adjustment for measurement error indicates that an additional year of schooling increases wages by 16%, a higher estimate of the economic returns to schooling than has been previously found.
Handle: RePEc:nbr:nberwo:4143
Template-Type: ReDIF-Paper 1.0
Title: Solow and the States: Capital Accumulation, Productivity and Economic Growth
Author-Name: Douglas Holtz-Eakin
Note: PE
Number: 4144
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4144
File-URL: http://www.nber.org/papers/w4144.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal, Vol. XLVI, No. 4, December 1993, pp. 425-440.
Abstract: National, state, and local policy makers have increasingly focused their attention on policies toward economic growth, especially efforts to raise the rate of investment. Recent studies of economic growth have raised a debate over the role played by the investment rate in the long-run performance of the economy. Evidence from the states suggests that the effects of capital accumulation are consistent with the predictions of the neoclassical growth model. At the same time, the estimates indicate a substantial role for human capital accumulation in raising productivity, in contrast to the neoclassical focus on physical capital investment.
Handle: RePEc:nbr:nberwo:4144
Template-Type: ReDIF-Paper 1.0
Title: Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies
Author-Name: Joseph E. Stiglitz
Author-Name: Aaron S. Edlin
Author-Person: ped12
Number: 4145
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4145
File-URL: http://www.nber.org/papers/w4145.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol. 85, no.5, pp. 1301-1312, December 1995.
Abstract: We argue here for a broader view of the biases in managers' decisions: In general, managerial rent-seeking affects not only the level of investment, but also the form. Our basic hypothesis is simple: given the now well-established scope for managerial discretion, managers have an incentive to exercise that discretion to enhance their income. Any managerial contract is subject to renegotiation, and a manager's pay is the outcome of an often bewildering bargaining process between management, the board of directors, and rival management teams or takeover artists.
Handle: RePEc:nbr:nberwo:4145
Template-Type: ReDIF-Paper 1.0
Title: Ivory Tower Versus Corporate Lab: An Empirical Study of Basic Research and Appropriability
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Author-Name: Rebecca Henderson
Author-Name: Adam Jaffe
Author-Person: pja49
Note: PR
Number: 4146
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4146
File-URL: http://www.nber.org/papers/w4146.pdf
File-Format: application/pdf
Publication-Status: published as Economics of Innovation and New Technology, under the title:"University vs. Corporate Patents: A Window on the Basicness of Innovations", Vol. 5, no. 1 (1997): 19-50.
Abstract: We explore the use of patent citations to measure the "basicness" and appropriability of inventions. We propose that the basicness of research underlying an invention can be characterized by the nature of the previous patents cited by an invention; that the basicness of research outcomes relates to the subsequent patents that cite an invention; and that the fraction of citing patents that are assigned to the same organization as the original invention is a measure of appropriabiity. We test the validity of these presumptions by comparing the value of our measures for university and corporate patents, and find that many of the measures do conform to our a priori belief that university research and research outcomes are more basic and harder to appropriate than those of corporations. We also find some evidence that basicness of outcomes is correlated with basicness of research, and that appropriability is lower for basic outcomes.
Handle: RePEc:nbr:nberwo:4146
Template-Type: ReDIF-Paper 1.0
Title: The Risk and Duration of Catastrophic Health Care Expenditures
Author-Name: Daniel Feenberg
Author-Person: pfe56
Author-Name: Jonathan Skinner
Author-Person: psk23
Note: AG EH PE
Number: 4147
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4147
File-URL: http://www.nber.org/papers/w4147.pdf
File-Format: application/pdf
Publication-Status: published as The Review of Economics and Statistics, 76(4), Nov. 1994, pp. 633-647
Abstract: Catastrophic medical expenses are an important economic risk facing the elderly. Little is known about the persistence of such out-of-pocket medical costs. We measure the time-series property of medical costs using information on medical deductions from a panel of tax returns. During the period of analysis, 1968-73, taxpayers could deduct medical expenses above 3 percent of income. We correct for the resulting censoring bias using multivariate Tobit estimated with a variant of the smoothed simulated maximum likelihood (SSML) method. The data suggest that the burden of out-of-pocket medical expenses is substantially larger for lower income families. Furthermore, the estimated coefficients suggest substantial time-persistence in out-of-pocket medical care costs; a $1 increase in out-of-pocket medical spending is predicted to increase future spending by an additional $2.80. These results may shed light both on the social value of catastrophic health insurance as well on aggregate saving behavior.
Handle: RePEc:nbr:nberwo:4147
Template-Type: ReDIF-Paper 1.0
Title: General Purpose Technologies "Engines of Growth?"
Author-Name: Timothy F. Bresnahan
Author-Person: pbr34
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: PR
Number: 4148
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4148
File-URL: http://www.nber.org/papers/w4148.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, Annals of Econometrics, vol. 65, no. 1, pp. 83-108 1995
Abstract: Whole eras of technical progress and economic growth appear to be driven by a few key technologies, which we call General Purpose Technologies (GPT's). Thus the steam engine and the electric motor may have played such a role in the past, whereas semiconductors and computers may be doing as much in our era. GPT's are characterized by pervasiveness (they are used as inputs by many downstream sectors), inherent potential for technical improvements, and innovational complementarities', meaning that the productivity of R&D in downstream sectors increases as a consequence of innovation in the GPT. Thus, as GPT's improve they spread throughout the economy, bringing about generalized productivity gains. Our analysis shows that the characteristics of GPT's imply a sort of increasing returns to scale phenomenon, and that this may have a large role to play in determining the rate of technical advance; on the other hand this phenomenon makes it difficult for a decentralized economy to fully exploit the growth opportunities offered by evolving GPT's. In particular; if the relationship between the GPT and its users is limited to arms-length market transactions, there will be "too little, too late" innovation in both sectors. Likewise, difficulties in forecasting the technological developments of the other side may lower the rate of technical advance of all sectors. Lastly, we show that the analysis of GPT's has testable implications in the context of R&D and productivity equations, that can in principle be estimated.
Handle: RePEc:nbr:nberwo:4148
Template-Type: ReDIF-Paper 1.0
Title: Protection For Sale
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 4149
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4149
File-URL: http://www.nber.org/papers/w4149.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review Vol. 84, 1994, pp. 833-850.
Abstract: We develop a model in which special interest groups make political contributions in order to influence an incumbent government's choice of trade policy. In the political equilibrium. the interest groups bid for protection, and each group's offer is optimal given the offers of the others. The politicians maximize their own welfare. which depends on the total amount of contributions collected and on the aggregate welfare of voters. We study the structure of protection that emerges in political equilibrium and the equilibrium contributions that are made by the different industry lobby groups. and show why these groups may in some cases prefer to have the government use trade policy to transfer income rather than more efficient means. We also discuss how our framework might be extended to include endogenous formation of lobby groups. political competition between incumbents and challengers. and political outcomes in a multicountry trading system.
Handle: RePEc:nbr:nberwo:4149
Template-Type: ReDIF-Paper 1.0
Title: Remeasuring Business Cycles
Author-Name: Christina D. Romer
Author-Person: pro407
Note: EFG DAE
Number: 4150
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4150
File-URL: http://www.nber.org/papers/w4150.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic History, vol 54, Sept 1994, pp 573-609
Abstract: This paper evaluates the consistency of the NBER business cycle reference dates over time. Analysis of the NBER methods suggests that the early turning points are derived from detrended data, while the dates after 1927 are derived from data in levels. To evaluate the importance of this and other changes in technique, the paper derives a simple algorithm that matches the postwar NBER peaks and troughs closely. When this algorithm is applied to data for 1884-1940, the new dates systematically place peaks later and troughs earlier than do the NBER dates. Using the new business cycle chronology, recessions have not become shorter, less severe, or less persistent between the pre-World War I and the post-World War 11 eras. Expansions, however, have become longer.
Handle: RePEc:nbr:nberwo:4150
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Corporate Pricing Strategies
Author-Name: Michael M. Knetter
Note: IFM ITI
Number: 4151
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4151
File-URL: http://www.nber.org/papers/w4151.pdf
File-Format: application/pdf
Publication-Status: published as Amihud, Yakov and Richard M. Lewich (eds.) Exchange Rates and Corporate Performance. New York: Irwin, 1994.
Abstract: This paper reviews the recent literature on pass-through and pricing-to-market. Pricing-to market behavior is estimated for a new, larger data set with 60 German and 20 U.S. 7-digit industries. The results conform closely to what has been found elsewhere in smaller detailed data sets and at higher levels of aggregation. German exporters show more tendency to price-to-market than U.S. exporters for the sample of industries studied, but there is much variation across the industries. Surprisingly, pricing-to-market is more pronounced in German exports of steel and chemicals than in consumer goods.
Handle: RePEc:nbr:nberwo:4151
Template-Type: ReDIF-Paper 1.0
Title: The Automobile Industry and The Mexico-Us Free Trade Agreement
Author-Name: Steven Berry
Author-Person: pbe18
Author-Name: Vittorio Grilli
Author-Name: F. Lopez-de-Silanes
Author-Person: plo137
Note: IO ITI
Number: 4152
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4152
File-URL: http://www.nber.org/papers/w4152.pdf
File-Format: application/pdf
Publication-Status: published as Peter Garber, ed. The US-Mexico Free Trade Agreement. Cambridge, MA: MIT Press, 1993
Abstract: This paper considers the likely effect on the automobile industry of a free trade agreement between the U.S. and Mexico. As there are currently large restrictions on imports into Mexico, one important outcome of a free trade agreement would be the opening of the Mexican market to U.S. producers. This is consistent with the history of the international auto industry and the fact that the U.S.-Canada Auto Pact opened a new, large market to U.S. manufacturers. The current state of the Mexican auto industry is considered in great detail, suggesting that the Mexican industry will continue to prosper, increasing output but also relying heavily on production from U.S. owned plants and on inputs imported from the U.S. and Canada. However, much of the existing domestically oriented industry is likely to be replaced by other North American producers. Finally, an econometric demand analysis implies that economic growth together with declines in prices to world levels could rapidly expand the size of the Mexican auto market. The free trade agreement represents an opportunity for product diversification and rationalization in the auto industry.
Handle: RePEc:nbr:nberwo:4152
Template-Type: ReDIF-Paper 1.0
Title: Black-Markets for Currency, Hoarding Activity and Currency Reform
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: Ildar Karimov
Note: IFM
Number: 4153
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4153
File-URL: http://www.nber.org/papers/w4153.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, 1997, vol.43/1-2
Abstract: In the former Soviet Union and throughout Eastern Europe, black-market exchange rates and second-economy prices often are interpreted by policy-makers as indicative of post-reform levels. However, these exchange rates and prices can provide highly-biased signals for policy setting. These biases are especially important when exchange rates fixed on the basis of these signals are expected to play a nominal anchor role during stabilizations. This paper traces the paths and biases in black-market exchange rates, second-economy prices, hoarding stocks. and privately-held dollars balances after policy-initiatives or other changes in the economic environment are implemented. The stimuli studied are official exchange-rate adjustments, price reforms, foreign-aid packages, altered risks of monetary confiscation or currency reforms, and goods-supply related initiatives. We provide the conditions under which announcements of reform lead short-run prices or exchange rates to overshoot or to undershoot their long-run equilibrium levels.
Handle: RePEc:nbr:nberwo:4153
Template-Type: ReDIF-Paper 1.0
Title: A Comparative Analysis of East and West German Labor Markets: Before and After Unification
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 4154
Creation-Date: 1992-08
Order-URL: http://www.nber.org/papers/w4154
File-URL: http://www.nber.org/papers/w4154.pdf
File-Format: application/pdf
Publication-Status: published as Differences and Changes in Wage Structures, ed. L. Katz and R. Freeman, University of Chicago Press, 1995.
Publication-Status: published as A Comparative Analysis of East and West German Labor Markets: Before and After Unification, Alan B. Krueger, Jorn-Steffen Pischke. in Differences and Changes in Wage Structures, Freeman and Katz. 1995
Abstract: In 1988, the wage distribution in East Germany was much more compressed than in West Germany or the U.S. Since the collapse of Communism and unification with West Germany, however, the wage structure in eastern Germany has changed considerably. In particular, wage variation has increased, the payoff to education has decreased somewhat, industry differentials have expanded, and the white collar premium has increased. Although average wage growth has been remarkably high in eastern Germany, individual variation in wage growth is similar to typical western levels. The wage structure of former East Germans who work in western Germany resembles the wage structure of native West Germans in some respects, but their experience-earnings profile is flat.
Handle: RePEc:nbr:nberwo:4154
Template-Type: ReDIF-Paper 1.0
Title: An Economic Analysis of Life Care
Author-Name: Jonathan S. Feinstein
Author-Person: pfe36
Author-Name: Edward G. Keating
Note: EH
Number: 4155
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4155
File-URL: http://www.nber.org/papers/w4155.pdf
File-Format: application/pdf
Abstract: Life care communities offer long term care to the elderly in the context of a residential community. Residents move into a life care community while still relatively young (though typically past age 65), initially occupying an independent living unit situated in a living complex similar to a retirement community. Later, when a resident requires more intensive care, she moves to an on-site nursing facility. We present an economic analysis of the life care industry. Our model includes a detailed specification of elderly couples' utility, a description of elderly morbidity and mortality experiences, and a formulation of the life care contract. Using extensive computer simulations we show that life care offers two main advantages to elderly as compared with stand-alone nursing homes: (i) reduced mobility costs and nearness to spouse and friends when sick; and (ii) insurance, linked to a rebate paid to the couple's heirs. We also investigate regulation of life care and the effects stemming from the risk of operator bankruptcy.
Handle: RePEc:nbr:nberwo:4155
Template-Type: ReDIF-Paper 1.0
Title: Testing Long Run Neutrality
Author-Name: Robert King
Author-Person: pki21
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 4156
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4156
File-URL: http://www.nber.org/papers/w4156.pdf
File-Format: application/pdf
Publication-Status: published as Economic Quarterly, Federal Reserve Bank of Richmond, Summer 1997, vol. 83, no.3, p. 69-101.
Abstract: Propositions about long run neutrality are at the heart of most macroeconomic models. Yet, since the 1970's when Lucas and Sargent presented powerful critiques of traditional neutrality tests, empirical researchers have made little progress on testing these propositions. In this paper we show that. in spite of the Lucas-Sargent critique. long run neutrality can be tested without specifying a complete model of economic activity. This is possible when the variables are integrated. In this case, permanent shifts in the historical data can be uncovered using VAR methods, and neutrality can be tested when there is a priori knowledge of one of the structural impact multipliers or one of the structural long run multipliers. In most circumstances such a priori knowledge is available. We use this framework to test four long run neutrality propositions: (i) the neutrality of money, (ii) the superneutrality of money. (iii) a vertical long run Phillips curve, and (iv) the Fisher effect. In each application, our a priori knowledge consists of a range of plausible values for the relevant impact and long run multipliers. We find that the U.S. postwar data are consistent with the neutrality of money and a vertical long run Phillips curve. but find evidence against the superneutrality of money and the long run Fisher relation. The sign of the estimated effect of money growth on output depends on the particular identifying assumption used. For a wide range of plausible identifying restrictions, nominal interest rates are found to move less than one-for-one with inflation in the long run.
Handle: RePEc:nbr:nberwo:4156
Template-Type: ReDIF-Paper 1.0
Title: The Efficiency of a Group-Specific Mandated Benefit: Evidence From Health Insurance Benefits for Maternity
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH PE
Number: 4157
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4157
File-URL: http://www.nber.org/papers/w4157.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, June 1994.
Abstract: I consider the effects of "group-specific mandated benefits", such as mandated maternity leave, which raise the costs of employing a demographically identifiable group. The efficiency of these policies, relative to more broad-based financing of benefits expansions, will largely be a function of the valuation of the mandated benefit by the targeted group. Such valuation should be reflected in substantial shifting of the cost of the mandate to groupspecific wages; however, there may be barriers to the adjustment of relative wages which impede such shifting. I study several 1976 state mandates which stipulated that childbirth be covered comprehensively in health insurance plans, increasing the cost of insuring women of child-bearing age by as much as 5 % of their wages. I find substantial shifting of the costs of these mandates to the wages of the targeted group. Correspondingly, I find little effect on total labor input for the group which benefitted from these mandates; hours rise and employment falls, as may be expected from an increase in the fixed costs of employment. These results are confirmed by using a 1978 Federal mandate as a "reverse experiment".
Handle: RePEc:nbr:nberwo:4157
Template-Type: ReDIF-Paper 1.0
Title: Income Distribution, Communities and the Quality of Public Education: A Policy Analysis
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Richard Rogerson
Author-Person: pro53
Note: PE
Number: 4158
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4158
File-URL: http://www.nber.org/papers/w4158.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, 1996, pp.135-164
Abstract: This paper analyzes within the context of a multicommunity model the effects of several policies that affect the financing of public education. The key features of the model are: (I) individuals differ with respect to income, (ii) individuals choose in which community to reside, (iii) communities are characterized by a proportional tax on income and a quality of public education, and (iv) a community's tax rate is chosen by majority vote. We examine three types of policies: subsidies for residency of specific income groups in particular communities, ceilings or floors on community level educational spending, and income redistribution. In each case we examine the consequences of these policies for both welfare and the quality of education across communities. We identify several policies which make all individuals better off and increase the quality of education in all communities.
Handle: RePEc:nbr:nberwo:4158
Template-Type: ReDIF-Paper 1.0
Title: Taxes and the Form of Ownership of Foreign Corporate Equity
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: Joosung Jun
Note: PE
Number: 4159
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4159
File-URL: http://www.nber.org/papers/w4159.pdf
File-Format: application/pdf
Publication-Status: published as Studies in International Taxationedited by Alberto Goivannini, R. Glenn Hubbard, and Joel Slemrod University of Chicago Press; May 1993
Publication-Status: published as Taxes and the Form of Ownership of Foreign Corporate Equity, Roger H. Gordon, Joosung Jun, Joel Slemrod. in Studies in International Taxation, Giovannini, Hubbard, and Slemrod. 1993
Abstract: Investors can achieve international diversification in their portfolios not only through purchasing foreign equity directly but also through investing in domestic firms which then invest abroad. Yet these alternative approaches are taxed very differently. A number of countries have also imposed various forms of capital controls restricting direct purchases of foreign equity. This paper estimates the degree to which these tax and nontax factors have affected the relative use of these two alternative methods of international diversification, using data on investment in the U.S. by investors from each of ten other countries during the period 1980-1989. While the composition of equity flows differs dramatically across countries, taxes do not appear to play an important role in the data in explaining this variation. Part of the explanation appears to be that tax distortions adjust endogenously to avoid large scale portfolio investments abroad. With the increasing integration of capital markets and the easing of capital controls in many countries, we have seen and expect to continue to see reductions in the tax distortions affecting the form of international capital flows.
Handle: RePEc:nbr:nberwo:4159
Template-Type: ReDIF-Paper 1.0
Title: Uncertainty, Investment, and Industry Evolution
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: EFG
Number: 4160
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4160
File-URL: http://www.nber.org/papers/w4160.pdf
File-Format: application/pdf
Publication-Status: published as International Economic Review, August 1996, vol. 37, no. 3, pp. 641-662.
Abstract: We study the effects of aggregate and idiosyncratic uncertainty on the entry of firms, total investment, and prices in a competitive industry with irreversible investment. We first use standard dynamic programming methods to determine firms' entry decisions, and we describe the resulting industry equilibrium and its characteristics, emphasizing the effects of different sources of uncertainty. We then show how the conditional distribution of prices can be used as an alternative means of determining and understanding the behavior of firms and the resulting industry equilibrium. Finally, we use four-digit U.S. manufacturing data to examine some implications of the model.
Handle: RePEc:nbr:nberwo:4160
Template-Type: ReDIF-Paper 1.0
Title: R&D Investment and International Productivity Differences
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: PR EFG
Number: 4161
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4161
File-URL: http://www.nber.org/papers/w4161.pdf
File-Format: application/pdf
Publication-Status: published as Economic Growth in the World Economy, Symposium 1992, edited by Horst Siebert, pp. 89-110.
Abstract: This paper extends previous research on the effect of investment on labor productivity at the country level by accounting for investment in R&D, as well as for investment in fixed and human capital. Privately-funded R&D investment is found to have a significant positive effect on productivity. Moreover, this effect appears to be quite large. The estimated social (national) rate of return to private R&D investment is about seven times as large as the return to investment in equipment and structures. The elasticity of GNP with respect to the privately-funded research capital stock is about 7 %--about 1(3 as large as the physical-capital elasticity (whose estimate is substantially reduced when R&D is accounted for). These findings do not support the hypothesis that there arecomplete, or at least instantaneous, international R&D spillovers. The social marginal product of government-funded research capital appears to be much lower than that of private research capital.
Handle: RePEc:nbr:nberwo:4161
Template-Type: ReDIF-Paper 1.0
Title: Microeconomic Rigidities and Aggregate Price Dynamics
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Note: EFG
Number: 4162
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4162
File-URL: http://www.nber.org/papers/w4162.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, 37 (4), 1993, 697-711.
Abstract: This paper is an attempt to enrich the characterization of the sluggish behavior of the aggregate price level. Our contribution to this vast literature is to explicitly consider microeconomic heterogeneity and its interaction with nonlinear microeconomic price adjustment policies. The model we propose outperforms the constant-probability-of-adjustment/partial- adjustment model in describing the path of postwar U.S. inflation. Using only aggregate data, we infer that the probability that a firm adjusts its price depends on the sign and the magnitude of the deviation of the price from its target level. At the aggregate level we find that the aggregate price responds less to negative shocks than to positive shocks, that the size of this asymmetry increases with the size of the shock, and that the number of firms changing their prices - and therefore the flexibility of the price level to aggregate shocks - varies endogenously over time in response to changes in economic conditions.
Handle: RePEc:nbr:nberwo:4162
Template-Type: ReDIF-Paper 1.0
Title: Conspicuous Consumption, Pure Profits, and the Luxury Tax
Author-Name: Laurie Simon Bagwell
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Note: PE
Number: 4163
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4163
File-URL: http://www.nber.org/papers/w4163.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol. 86, no. 3, pp. 349-373, June 1996.
Abstract: We examine a model of conspicuous consumption and explore the nature of competition in markets for conspicuous goods. We assume that, in addition to intrinsic utility, individuals seek status, and that perceptions of wealth affect status. Under identifiable conditions, the model generates Veblen effects: utility is positively related to the price of the good consumed. Equilibria are then characterized by the existence of "budget' brands (which are sold at a price equal to marginal cost), as well as 'luxury" brands (which are sold at a price above marginal cost, despite the fact that producers are perfectly competitive). Luxury brands are not intrinsically superior to budget brands but are purchased by consumers who seek to signal high levels of wealth. Within the context of this model, an appropriately designed luxury tax is a non-distortionary tax on pure profits.
Handle: RePEc:nbr:nberwo:4163
Template-Type: ReDIF-Paper 1.0
Title: Economic Foundations of Cost Effective Analysis
Author-Name: Alan M. Garber
Author-Name: Charles E. Phelps
Note: EH
Number: 4164
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4164
File-URL: http://www.nber.org/papers/w4164.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, Vol. 16 (1997): 1-31.
Abstract: In order to address several controversies in the application of cost-effectiveness analysis, we investigate the principles underlying the technique and discuss the implications for the evaluation of medical interventions. Using a standard von Neumann-Morgenstern utility framework, we show how a cost-effectiveness criterion can be derived to guide resource allocation decisions. We investigate its relation to age, gender, income level, and risk aversion. Cost-effectiveness analysis can be a useful and powerful tool for resource allocation decisions, but in the presence of heterogeneous preferences and personal characteristics, a cost-effectiveness criterion that is applied at the population level is unlikely to yield pareto-optimal resource allocations.
Handle: RePEc:nbr:nberwo:4164
Template-Type: ReDIF-Paper 1.0
Title: The Accuracy of Reports of Foreign Exchange Intervention
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: IFM
Number: 4165
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4165
File-URL: http://www.nber.org/papers/w4165.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, December 1993, Vol. 12, No. 6,pp. 644-653.
Abstract: Daily foreign exchange operations by the Federal Reserve are not revealed to the public contemporaneously or, up until recently, even years after the fact. With the recent release of daily intervention data it is now possible to gauge the accuracy of the market's perceptions of the Fed's foreign exchange intervention. In this paper we look at both qualitative and quantitative evidence on the accuracy of press reports of foreign exchange intervention by the Federal Reserve between the beginning of January 1985 and the end of December 1989. The evidence shows that the likelihood of intervention being reported given that it actually occurred was 72 percent and that the likelihood of intervention actually occurring given that it was reported was 88 percent. Interventions which were reported by the newspaper were larger on average than those which were not reported and this difference is statistically significant. Multinomial logit analysis also demonstrates that the likelihood of intervention being reported increased with the size of the intervention.
Handle: RePEc:nbr:nberwo:4165
Template-Type: ReDIF-Paper 1.0
Title: Greenback Resumption and Silver Risk: The Economics and Politics of Monetary Regime Change in the United States, 1862-1900
Author-Name: Charles W. Calomiris
Author-Person: pca421
Note: DAE ME
Number: 4166
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4166
File-URL: http://www.nber.org/papers/w4166.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. and Forrest Capie (eds.) Monetary Regime Transformations. Cambridge University Press, 1993.
Abstract: This paper begins by developing a framework for price and interest rate determination under suspension of convertibility during the national banking period. The model is applied to interpret unanticipated price level shocks and expected deflation during the period of green back inconvertibility( 1862-1879), and to explain forward discounts on the dollar during the 1890s, which saw substantial risk of a return to suspension of convertibility. Special features of dollar value risk during the 1890s, including an endogenous supply of government licensed money (national bank notes), and a time-varying probability of a long-run switch to silver, require a different model of speculative attack from the standard approach which assumes a government-controlled supply of money. The salient empirical findings of the paper are: (1) Ex ante real interest rates were higher than nominal interest rates during the 1870s, and lower than nominal interest rates during the silver-risk episodes of the mid-1890s. (2) Runs on the dollar in the 1890s mainly reflected concerns about short-run convertibility, and small depreciation of the dollar contingent on suspension, rather than a likely immediate switch from gold to a permanently depreciated silver standard. (3) Expected deflation in the 1870s accounts for the apparent weakness of the procyclicality of prices, using annual data for the national banking period. Once one takes account of shifting expectations of inflation, unanticipated movements in prices and output are much more closely related.
Handle: RePEc:nbr:nberwo:4166
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Shrt-Term Real Interest Differentials Between Japan and the United States
Author-Name: Richard C. Marston
Note: IFM
Number: 4167
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4167
File-URL: http://www.nber.org/papers/w4167.pdf
File-Format: application/pdf
Publication-Status: published as Monetary and Economic Studies, Wnter 1992-93
Abstract: Many past studies of relative financing costs in the United States and Japan have relied on interest rates from the 1970s and earlier when Japanese financial markets were subject to numerous regulations and controls and were shielded by capital controls from financial markets abroad. Interest rates on bank loans, the most important source of financing in Japan, in fact, systematically underestimated the true costs of borrowing. In the United States, capital controls were being dismantled by the early 1970s, but the prime loan rate used in past studies had by then become an unreliable measure of the true cost of borrowing in the United States. This study shows that most of the reported gap in short term financing costs between the two countries can be traced to past features of the national markets which have largely disappeared Now that markets have been deregulated and international capital flows liberalized, national interest rates are closely related to those in the unregulated Eurocurrency markets. And, as this study shows, average real interest differentials in the Eurocurrency markets have been close to zero over the last twenty years.
Handle: RePEc:nbr:nberwo:4167
Template-Type: ReDIF-Paper 1.0
Title: Relative-Price Changes as Aggregate Supply Shocks
Author-Name: Laurence Ball
Author-Person: pba605
Author-Name: N. Gregory Mankiw
Note: EFG ME
Number: 4168
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4168
File-URL: http://www.nber.org/papers/w4168.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, February 1995, p. 161-193
Abstract: This paper proposes a theory of supply shocks, or shifts in the short-run Phillips curve, based on relative-price changes and frictions in nominal price adjustment. When price adjustment is costly, firms adjust to large shocks but not to small shocks, and so large shocks have disproportionate effects on the price level. Therefore, aggregate inflation depends on the distribution of relative-price changes: inflation rises when the distribution is skewed to the right, and falls when the distribution is skewed to the left. We show that this theoretical result explains a large fraction of movements in postwar U.S. inflation. Moreover, our model suggests measures of supply shocks that perform better than traditional measures, such as the relative prices of food and energy.
Handle: RePEc:nbr:nberwo:4168
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Adjustment Under Bretton Woods and the Post-Bretton Woods Float: An Impulse-Response Analysis
Author-Name: Tamim Bayoumi
Author-Person: pba366
Author-Name: Barry Eichengreen
Author-Person: pei2
Note: IFM
Number: 4169
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4169
File-URL: http://www.nber.org/papers/w4169.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, July 1994, pp. 813-827
Abstract: We use time-series methods to estimate a simple aggregate-supply aggregate-demand model in order to analyze the comparative performance of fixed- and flexible-exchange-rate systems and test competing hypotheses designed to explain shifts between exchange-rate regimes. The paper provides a coherent explanation of the causes and consequences of the shift from the Bretton Woods System of pegged exchange rates to the post-Bretton-Woods float. The shift from fixed to floating was associated with a modest increase in the cross-country dispersion of supply shocks but not with an increase in their average magnitude. In contrast, there was little change in either the cross-country dispersion or the average magnitude of demand shocks. More important in explaining the collapse of Bretton Woods were factors that heightened the impact of shocks on the external accounts, forcing governments to respond to supply shocks with changes in demand that stabilized prices and the exchange rate at the expense of increased output volatility.
Handle: RePEc:nbr:nberwo:4169
Template-Type: ReDIF-Paper 1.0
Title: Is Price Adjustment Asymmetric?: Evaluating the Market Share and Marketing Bottlenecks Hypothesis
Author-Name: Michael M. Knetter
Note: IFM ITI
Number: 4170
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4170
File-URL: http://www.nber.org/papers/w4170.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, Feb. 1994, pp. 55-70
Abstract: The theoretical literature on pricing-to-market has identified two possible reasons why the elasticity of prices to exchange rate changes may be asymmetric across appreciations and depreciations. If firms are attempting to increase market shares in foreign markets subject to the possibility of trade restrictions, then more pricing-to-market may occur during appreciations of the exporter's currency. If firms face capacity constraints in their distribution networks, then pricing-to-market may be exaggerated during periods of depreciation of the exporters currency. This paper uses panel data on German and Japanese 7-digit industry exports to compare these competing explanations for asymmetries in pricing-to-market behavior. While the data seldom reject the null hypothesis of a symmetric response of prices to exchange rates, some industries, notably automobiles, provide empirical support for the market share model. Only a pooled regression with Japanese data supports the marketing bottlenecks model.
Handle: RePEc:nbr:nberwo:4170
Template-Type: ReDIF-Paper 1.0
Title: Firms' Responses to Anticipated Reductions in Tax Rates: The Tax Reform Act of 1986
Author-Name: Myron S. Scholes
Author-Name: G. Peter Wilson
Author-Name: Mark A. Wolfson
Note: PE
Number: 4171
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4171
File-URL: http://www.nber.org/papers/w4171.pdf
File-Format: application/pdf
Publication-Status: published as Myron S. Scholes & G. Peter Wilson & Mark A. Wolfson, 1992. "Firms' Responses to Anticipated Reductions in Tax Rates: The Tax Reform Act of 1986," Journal of Accounting Research, vol 30.
Abstract: The 1986 Tax Act in the U.S. gradually reduced corporate tax rates from 46 percent prior to the Act to 34 percent by the middle of 1988. This reduction gave firms an incentive, in 1986 and 1987, to shift taxable income to future years when tax rates would be lower. There are substantial impediments, however, to shifting taxable income across periods (notably, offsetting tax consequences to other contracting parties and a host of nontax costs), and it becomes an empirical question as to whether the benefits of shifting taxable income are sufficient to overcome the impediments. This paper examines whether firms deferred income recognition and/or accelerated expense recognition in anticipation of these declining tax rates. We find statistically significant evidence that firms shifted gross margin from the quarter immediately preceding and anticipated decrease in tax rates to the next quarter. We estimate that, on average, the 812 firms in our sample saved approximately five hundred thousand dollars in taxes by deferring sales. At a gross margin rate of one-third, this amounts to nearly twenty billion dollars of shifted sales for our sample firms.
Handle: RePEc:nbr:nberwo:4171
Template-Type: ReDIF-Paper 1.0
Title: Endogenous Creditor Seniority and External Debt Values
Author-Name: Michael Dooley
Author-Person: pdo13
Author-Name: Mark R. Stone
Note: IFM
Number: 4172
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4172
File-URL: http://www.nber.org/papers/w4172.pdf
File-Format: application/pdf
Publication-Status: published as Michael Dooley & Mark R. Stone, 1993. "Endogenous Creditor Seniority and External Debt Values," IMF Staff Papers, Palgrave Macmillan, vol. 40(2), pages 395-413, June.
Abstract: A new aggregation scheme used to measure the sources of fiscal financing of indebted countries suggests that there was a fundamental improvement in the seniority of domestic debt at the expense of foreign bank debt during the late 1980s. We argue that this was the revenue maximizing response of governments to internal and external capital flight that drained the domestic financial "tax base" subject to indirect taxation. Empirical analysis indicates that the profile of the sources of fiscal financing influenced external debt values. The econometric analysis also implies that previous studies have neglected an important reason for the decline in loan values from 1985 to 1989: the increase in international interest rates.
Handle: RePEc:nbr:nberwo:4172
Template-Type: ReDIF-Paper 1.0
Title: Political Instability and Economic Growth
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Sule Ozler
Author-Name: Nouriel Roubini
Author-Person: pro145
Author-Name: Phillip Swagel
Author-Person: psw34
Note: EFG IFM ITI
Number: 4173
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4173
File-URL: http://www.nber.org/papers/w4173.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Growth, vol.1, no.2, pp. 189-212, June 1996.
Abstract: This paper investigates the relationship between political instability and per capita GDP growth in a sample of 113 countries for the period 1950-1982. We define ?political instability? as the propensity of a government collapse, and we estimate a model in which political instability and economic growth are jointly determined. The main result of this paper is that in countries and time periods with a high propensity of government collapse, growth is significantly lower than otherwise. This effect remains strong when we restrict our definition of ?government change? to cases of substantial changes of the government.
Handle: RePEc:nbr:nberwo:4173
Template-Type: ReDIF-Paper 1.0
Title: Employment and Unemployment in the 1930s
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE
Number: 4174
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4174
File-URL: http://www.nber.org/papers/w4174.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, vol. 7, Spring 1993, p. 41-59
Abstract: This paper surveys recent research on employment and unemployment in the 1930s. Unlike earlier studies that tended to rely heavily on aggregate time series, the research discussed in this paper focuses on disaggregated data. This shift in focus stems from two factors. First, dissaggregated evidence provides many more degrees of freedom than the decade of annual observations associated with the depression and thus can prove helpful in discriminating between macroeconomic models. Second, and more importantly, disaggregation has revealed aspects of labor market behavior hidden in the time series that are essential to their proper interpretation and which are, in any case, important in their own right. In particular, the findings dispute the view that representative-agent models are useful for interpreting shifts in employment and unemployment over the course of the Depression.
Handle: RePEc:nbr:nberwo:4174
Template-Type: ReDIF-Paper 1.0
Title: Investments of Uncertain Cost
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Note: IO PR
Number: 4175
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4175
File-URL: http://www.nber.org/papers/w4175.pdf
File-Format: application/pdf
Publication-Status: published as "Journal of Financial Economics" vol. 34, pp. 53-76, (1993)
Abstract: I study irreversible investment decisions when projects take time to complete, and are subject to two types of uncertainty over the cost of completion. The first is technical uncertainty, i.e., uncertainty over the amount of time, effort, and materials that will ultimately be required to complete the project, and that is only resolved as the investment proceeds. The second is input cost uncertainty, i.e., uncertainty over the prices and quantities of labor and materials required, and which is external to the firm's investment activity. I derive a simple decision rule that maximizes the firm's value, and I use it to show how these two types of uncertainty have very different effects on investment decisions. As an example. I analyze the decision to start or continue building a nuclear power plant during the 1980's.
Handle: RePEc:nbr:nberwo:4175
Template-Type: ReDIF-Paper 1.0
Title: Optimal Cleanup and Liability After Environmentally Harmful Discharges
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 4176
Creation-Date: 1992-09
Order-URL: http://www.nber.org/papers/w4176
File-URL: http://www.nber.org/papers/w4176.pdf
File-Format: application/pdf
Publication-Status: published as "A Note on Optimal Cleanup and Liability After Environmentally Harmful Discharges," Research in Law and Economics, 1994, Vol. 16, 17-24.
Abstract: This article studies how liability for environmentally harmful discharges affects the incentives of firms to engage in cleanup and invest in precautions, as well as the incentives of consumers to purchase the goods whose production leads to discharges. Our main conclusion is that making firms responsible for cleanup and strictly liable for any remaining harm will lead to the socially optimal outcome. We also show that under the negligence approach -- whereby a firm is liable for damages only if it fails to take appropriate precautions or to engage in proper cleanup -- the outcome will not be optimal: too much of the good will be purchased.
Handle: RePEc:nbr:nberwo:4176
Template-Type: ReDIF-Paper 1.0
Title: Incidence and Allocation Effects of a State Fiscal Policy Shift: The Florio Initiatives in New Jersey
Author-Name: William T. Bogart
Author-Name: David F. Bradford
Author-Name: Michael G. Williams
Note: PE
Number: 4177
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4177
File-URL: http://www.nber.org/papers/w4177.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal, Vol. XLV, No. 4, pp. 371-387 (December 1992).
Abstract: We calculate the incidence of recent changes to the New Jersey state tax system on a sample of homeowners. Our analysis distinguishes between business-as-usual responses to an evolving fiscal situation and tax changes that constitute a surprise. The latter have incidence effects; the former do not. We conclude that, if the changes carried out by NJ Governor Jim Florio are regarded as permanent, they effected a one-time wealth redistribution from, on average, higher-income homeowners toward lower-income homeowners and from owners of suburban residential property toward owners of urban residential property. Although effects on the averages for identifiable groups are clear and significant there is very considerable variation in the effects on individual homeowners within groups. We also estimate the allocation effects of the tax changes using a general equilibrium model that incorporates the option of in-and out migration. The results suggest that the changes will induce a sizable migration of weal thy and high-income people out of the state.
Handle: RePEc:nbr:nberwo:4177
Template-Type: ReDIF-Paper 1.0
Title: Industrial Development in Cities
Author-Name: J. Vernon Henderson
Author-Person: phe30
Author-Name: Ari Kuncoro
Author-Person: pku258
Author-Name: Matthew Turner
Author-Person: ptu3
Note: EFG ITI
Number: 4178
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4178
File-URL: http://www.nber.org/papers/w4178.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, 1995, 103, pp.1067-1090.
Abstract: Using extensive data on 1970 and 1987 urban characteristics, the paper analyzes changes in employment in specific manufacturing industries in cities between 1970 and 1987. Two sets of questions are the focus. First, what present or past characteristics of a city's economic environment are critical in determining current employment levels in different industries? How much persistence in employment patterns is there over time and what is the source of that persistence? The second set of questions explores what inferences can be made from the data and results concerning the nature of externalities in urban markets, involving diversity of suppliers to firms, information spillovers concerning current market conditions and information spillovers involving the spread of technology. While the literature assumes employment levels in individual industries in individual cities show strong mean reversion ("convergence"), in fact that is not the case in the 1970-87 time period. The raw data show strong persistence. The major source of that persistence appears to be persistence in local demand conditions (i.e., persistence in regional comparative advantage), as opposed to other measured or unmeasured urban characteristics. Retention of employment is also strongly helped by the historical degree of local specialization in the industry, perhaps indicating a form of dynamic externality. Other historical conditions are not important.
Handle: RePEc:nbr:nberwo:4178
Template-Type: ReDIF-Paper 1.0
Title: Complementarity and Increasing Returns in Intermediate Inputs: A Theoretical and Applied General-Equilibrium Analysis
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Thomas F. Rutherford
Author-Person: pru142
Note: ITI
Number: 4179
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4179
File-URL: http://www.nber.org/papers/w4179.pdf
File-Format: application/pdf
Publication-Status: published as "Complementarity and Increasing Returns in Intermediate Inputs" Journal of Development Economics, vol 45, 1994, pp 101-119
Abstract: Conventional analysis in the trade-industrial-organization literature suggests that, when a country has some market power over an imported good, some small level of protection must be welfare improving. This is essentially a terms-of-trade argument that is reinforced if the imported goods are substitutes for domestic goods produced with increasing returns to scale, goods that are initially underproduced in free-trade equilibrium. This paper notes that this result may not hold when (1) the imports are intermediates used in a domestic increasing-returns industry, and/or (2) the intermediates are complements for domestic inputs produced with increasing returns. We then demonstrate such an outcome with respect to Mexican protection against imported auto parts using an applied general-equilibrium model of the North American auto industry.
Handle: RePEc:nbr:nberwo:4179
Template-Type: ReDIF-Paper 1.0
Title: Projecting the Number of New AIDS Cases in the U.S.
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: Sherry Glied
Note: EH
Number: 4180
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4180
File-URL: http://www.nber.org/papers/w4180.pdf
File-Format: application/pdf
Publication-Status: published as International Journal of Forecasting, Vol. 8 (Special Issue on Population Forecasting) (1992): 339-365.
Abstract: This paper reviews the two leading methods used to project the number of AIDS cases: back calculation and extrapolation. These methods are assessed in light of key features of the HIV/AIDS epidemic and of data on the epidemic; they are also assessed in terms of the quality of the projections they yield. Our analysis shows that both methods have tended to overproject, often by sizable amounts, the number of AIDS cases in the U.S., especially among homosexual/bisexual males and users of blood and blood products. Our results provide no evidence that the use of AZT and other prophylaxis accounts for these projection errors. Rather, the overprojections appear to be mainly the result of a considerable reduction in the rate of new HIV infection among the gay community starting in 1983-85. A new method for projecting AIDS cases is proposed that exploits knowledge about the process generating AIDS cases and that incorporates readily available information about rates of new HIV infection. This method is far less sensitive to estimates of the incubation distribution than the method of back calculation and is shown, for the two transmission categories studied, to generate far more accurate AIDS case projections through 1990 than those based on the method of extrapolation. Relative to the method of extrapolation, this method projects 22,000 fewer new AIDS cases for 1995 (a 36 percent difference). This method also projects that intravenous drug users will replace homosexual/bisexual men as the dominant transmission category for AIDS.
Handle: RePEc:nbr:nberwo:4180
Template-Type: ReDIF-Paper 1.0
Title: 401(k) Plans and Tax-Deferred Saving
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Steven F. Venti
Author-Name: David A. Wise
Author-Person: pwi45
Note: PE AG
Number: 4181
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4181
File-URL: http://www.nber.org/papers/w4181.pdf
File-Format: application/pdf
Publication-Status: published as Studies in the Economics of Aging, David A. Wise. ed., University of Chicago Press, 1994, pp. 105-138
Publication-Status: published as 401(k) Plans and Tax-Deferred Saving, James M. Poterba, Steven F. Venti. in Studies in the Economics of Aging, Wise. 1994
Abstract: This paper examines the role of 40 1(k) plans in retirement saving by U.S. households. It charts the rapid growth of these plans during the 1980s; more than 15 million workers now participate in 401(k)s. Data from the Survey of Income and Program Participation are used to calculate 401(k) eligibility and participation rates by detailed age and income categories. For virtually all groups, 401(k) participation rates conditional on eligibility are much higher than take-up rates for IRAs, suggesting some important differences between these saving vehicles. We consider the interaction between 401(k)s and IRAS, and show that since 1986, only one-fifth of 401(k) contributors have also made IRA contributions. Some 401 (k) eligibles who make limit contributions to their IRAs do not make 401(k) contributions. We also explore whether contributions to 401(k) plans represent "new saving." Comparing the net worth of households that are eligible for 401(k)s with that of households that are not eligible, and comparing the net worth of households that have been eligible for 401(k)s for many years with those who have been eligible for short periods, suggests that 401(k) saving has a negligible effect in displacing other private saving.
Handle: RePEc:nbr:nberwo:4181
Template-Type: ReDIF-Paper 1.0
Title: The Increasing Annuitization of the Elderly- Estimates and Implications for Intergenerational Tranfers, Inequality, and National Saving
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: David N. Weil
Author-Person: pwe24
Note: AG
Number: 4182
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4182
File-URL: http://www.nber.org/papers/w4182.pdf
File-Format: application/pdf
Abstract: This paper examines changes over time in the degree to which the resources (human plus nonhuman wealth) of the elderly have been annuitized. Using data from the 1962 and 1983 Federal Reserve Surveys of Consumer Finances we find evidence of an increase in annuitization which is particularly pronounced among the older elderly (those over 75) and among women. The estimated 1983 flow of aggregate bequests to children and grandchildren would have been 20% larger were it not for this increase in annuitization. The change in annuitization may have contributed significantly to the recent decline of the U.S. national saving rate.
Handle: RePEc:nbr:nberwo:4182
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates, Country Preferences, and Gold
Author-Name: Michael Dooley
Author-Person: pdo13
Author-Name: Peter Isard
Author-Name: Mark Taylor
Note: IFM
Number: 4183
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4183
File-URL: http://www.nber.org/papers/w4183.pdf
File-Format: application/pdf
Publication-Status: Published as "Exchange Rates, Country-Specific Shocks, and Gold", AFE, Vol. 5, no. 3 (1995): 121-129.
Abstract: This paper provides indirect tests of the hypothesis that exchange rate movements may be largely coterminus with changes in preferences for holding claims on different countries. It is argued that changes in country preferences will be reflected systematically in the price of gold and, hence, that gold price movements, under the maintained hypothesis, should have explanatory power with respect to exchange rate movements over and above the effects of monetary shocks. The paper applies multivariate vector autoregression and cointegration modeling techniques to test for the short- and long-run influence of gold prices on exchange rates conditional on other monetary and real macroeconomic variables, and applies the resulting error correction exchange rate equation to out-of-sample forecasting exercises.
Handle: RePEc:nbr:nberwo:4183
Template-Type: ReDIF-Paper 1.0
Title: Hyperinflation with Currency Substitution: Introducing an Indexed Currency
Author-Name: Federico Sturzenegger
Author-Person: pst825
Note: IFM ME
Number: 4184
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4184
File-URL: http://www.nber.org/papers/w4184.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, August 1994
Abstract: Currency substitution (CS) and financial adaptation are in general believed to increase the equilibrium rate of inflation. This result derives from a setup in which the government finances a certain amount of real resources through money printing and where CS reduces the base of the inflation tax. This paper shows this intuition wrong for those situations where the hyperinflation is expectations-driven. Incorporating CS in an Obstfeld-Rogoff (1983) framework I show reduces the inflation rates along the hyperinflationary equilibrium. The intuition is simple: if agents have an easy way of substituting away from domestic currency then the required inflation rates to sustain a path where real balances disappears is necessarily lower. The implications of the model are then tested empirically.
Handle: RePEc:nbr:nberwo:4184
Template-Type: ReDIF-Paper 1.0
Title: The Role of Information in U.S. Offshore Oil and Gas Lease Auctions
Author-Name: Robert H. Porter
Author-Person: ppo97
Note: IO
Number: 4185
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4185
File-URL: http://www.nber.org/papers/w4185.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, January 1995,vol. 63, No. 1, pp. 1-27.
Abstract: This paper describes the U.S. offshore oil and gas lease sales, conducted by the Department of the Interior since 1954. Several decision problems are discussed, including bidding for leases, the government's decision whether to accept the highest bid, the incidence and timing of exploratory drilling, and the formation of bidding consortia. It is argued that equilibrium models that emphasize informational and strategic issues, and that account for institutional features of the leasing program, provide accurate predictions of outcomes.
Handle: RePEc:nbr:nberwo:4185
Template-Type: ReDIF-Paper 1.0
Title: Transfers
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 4186
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4186
File-URL: http://www.nber.org/papers/w4186.pdf
File-Format: application/pdf
Abstract: In this paper I develop a positive theory of intergenerational transfers. I argue that transfers are a means to induce retirement. that is, to buy the elderly out of the labor force. The reason why societies choose to do such a thing is that aggregate output is higher if the elderly do not work. I model this idea through positive externalities in the average stock of human capital: because skills depreciate with age. one implication of these externalities is that the elderly have a negative effect on the productivity of the young. When the difference between the skill level of the young and that of the old is large enough, aggregate output in an economy where the elderly do not work is higher. Retirement in this case will be a good thing; pensions are just the means by which such retirement is induced. Unlike other theories of transfers. the theory in this paper is consistent with a number of regularities: transfers appear to be a luxury good that societies buy only after they reach a certain level of development and income: transfers are the only component of public spending that appear to be positively correlated with growth in a cross-section of countries; and transfers are linked to retirement and to the employment history of the worker. One key prediction of the model is that if the dependency ratio keeps rising, then the social security system will collapse, and that this will be the optimal thing to happen. Finally, a strict interpretation of the model would suggest that transfers to poor people, minimum wage laws. minimum working-age requirements and other types of public welfare serve the same purpose as old age social security; they keep workers possessing low human capital out of the labor force.
Handle: RePEc:nbr:nberwo:4186
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Illicit Drug Use on the Labor Supply of Young Adults
Author-Name: Robert Kaestner
Author-Person: pka42
Note: EH
Number: 4187
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4187
File-URL: http://www.nber.org/papers/w4187.pdf
File-Format: application/pdf
Publication-Status: published as The Journal of Human Resources, vol. 29, No. 1, Winter 1994, pp. 126-155.
Abstract: This paper analyzes the effects of illicit drug use on the labor supply of a sample of young adults using data from the National Longitudinal Survey of Youth. The paper investigates whether the frequency and timing of marijuana and cocaine use are systematically related to labor supply. and presents both cross sectional and longitudinal estimates. The cross sectional results are consistent with those of previous researchers. and suggest that illicit drug use has large, negative effects on labor supply. The longitudinal results. however, suggest that illicit drug use does not have a significant adverse impact on labor supply.
Handle: RePEc:nbr:nberwo:4187
Template-Type: ReDIF-Paper 1.0
Title: Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model
Author-Name: John Y. Campbell
Author-Person: pca54
Note: EFG
Number: 4188
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4188
File-URL: http://www.nber.org/papers/w4188.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, vol. 33 (June 1994), pp. 463-506.
Abstract: This paper argues that a clear understanding of the stochastic growth model can best be achieved by working out an approximate analytical solution. The proposed solution method replaces the true budget constraints and Euler equations of economic agents with loglinear approximations. The model then becomes a system of loglinear expectational difference equations, which can be solved by the method of undetermined coefficients. The paper uses this technique to study shocks to technology and government consumption. It emphasizes that the persistence of shocks is an important determinant of their macroeconomic effects.
Handle: RePEc:nbr:nberwo:4188
Template-Type: ReDIF-Paper 1.0
Title: Optimal Distribution and Taxation of the Family
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 4189
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4189
File-URL: http://www.nber.org/papers/w4189.pdf
File-Format: application/pdf
Publication-Status: published as Scandinavian Journal of Economics, vol. 98, no. 1, pp. 75-92, (1996).
Abstract: Income tax burdens on family units are adjusted to reflect differences in ability to pay attributable to whether the unit consists of a single individual or a married couple and how many dependents are present. Substantial controversy exists over the appropriate forms of adjustment, and existing approaches to taxation of the family vary greatly across jurisdictions. This article derives equitable relative tax burdens for different family configurations from a utilitarian welfare function. The analysis considers how relative burdens should depend on the extent to which resources are shared among family members, the existence of economies of scale, the presence of altruism among family members, whether expenditures on children should be viewed as part of parents' consumption, and the possibility that some family members (children) have different utility functions from others.
Handle: RePEc:nbr:nberwo:4189
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Price Shopping in Medical Markets: Hospital Responses to PPOs in California
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH PE
Number: 4190
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4190
File-URL: http://www.nber.org/papers/w4190.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, July 1994
Abstract: The last ten years have seen the introduction of price shopping into medical markets which were previously dominated by price insensitive consumers. Price shopping has been facilitated by the advent of the Preferred Provider Organization (PPO), which coordinates the demand of a large number of individual health care buyers, thereby gaining market rower which it uses to obtain Sleep discounts off list prices from providers. I study hospital responses to the advent of price competition in California over the 1984-1988 period. I note that, due to the nature of hospital bargaining with PPOs, hospitals should face more competitive pressure in hospital markets that arc more competitive ex-ante. This hypothesis is supported by the fact that hospital net prices declined in more ex-ante competitive areas in California after the arrival of PPOs. Hospital average costs did not decline in more competitive areas, however, indicating that there was a reduction in hospital markups. Care to the uninsured by hospitals. which is financed out of markups, fell substantially as competitive pressure grew; there was a 50 cent reduction in uncompensated care for every one dollar rise in discounts to private payers.
Handle: RePEc:nbr:nberwo:4190
Template-Type: ReDIF-Paper 1.0
Title: Credit and Deferral as International Investment Incentives
Author-Name: James R. Hines Jr.
Author-Person: phi111
Note: ITI PE
Number: 4191
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4191
File-URL: http://www.nber.org/papers/w4191.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 55, no. 2, pp. 323-347, October 1994
Abstract: The US government taxes the foreign income of American firms, using a system that grants credits for foreign taxes paid and permits tax deferral for unrepatriated income. This paper shows that the tax system encourages firms to restrict their equity stakes in new foreign investments, and to finance their new investments with considerable debt. These incentives are strongest for US investments in low-tax foreign countries, and exist even when transfer price regulation effectively limits the profit rates foreign subsidiaries can earn. The behavior of US multinationals in 1984 appears to reflect these tax incentives.
Handle: RePEc:nbr:nberwo:4191
Template-Type: ReDIF-Paper 1.0
Title: The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth vs. Relative Wage Effects
Author-Name: Michael W. Klein
Author-Person: pkl9
Author-Name: Eric Rosengren
Note: ITI IFM
Number: 4192
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4192
File-URL: http://www.nber.org/papers/w4192.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, vol. 36, no. 3/4, May 1994, p. 373
Abstract: There has been a significant correlation between United States inward foreign direct investment and the United States real exchange rate since the 1970s. Two alternative reasons for this relationship are that the real exchange rate affects the relative cost of labor and that the real exchange rate alters relative wealth across countries. In this paper we explore these alternatives by examining the determinants of four measures of inward foreign direct investment to the United States from seven industrial countries over the period 1979 to 1991. We find strong evidence that relative wealth significantly affects U.S. inward foreign direct investment. We find no evidence that relative wages have a significant impact on the determination of U.S. foreign direct investment. These results are robust to the choice of countries in our sample and when controlling for changes in tax codes.
Handle: RePEc:nbr:nberwo:4192
Template-Type: ReDIF-Paper 1.0
Title: Trading Volume and Serial Correlation in Stock Returns
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Sanford J. Grossman
Author-Person: pgr108
Author-Name: Jiang Wang
Note: AP
Number: 4193
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4193
File-URL: http://www.nber.org/papers/w4193.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, vol cviii (4), November 1993, pp. 905-939
Abstract: This paper investigates the relationship between stock market trading volume and the autocorrelations of daily stock index returns. The paper finds that stock return autocorrelations tend to decline with trading volume. The paper explains this phenomenon using a model in which risk-averse "market makers" accommodate buying or selling pressure from "liquidity" or "non-informational" traders. Changing expected stock returns reward market makers for playing this role. The model implies that a stock price decline on a high-volume day is more likely than a stock price decline on a low-volume day to be associated with an increase in the expected stock return.
Handle: RePEc:nbr:nberwo:4193
Template-Type: ReDIF-Paper 1.0
Title: Market Conditions and Retirement of Physical Capital: Evidence fron Oil Tankers
Author-Name: Iain Cockburn
Author-Person: pco166
Author-Name: Murray Frank
Author-Person: pfr9
Note: PR
Number: 4194
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4194
File-URL: http://www.nber.org/papers/w4194.pdf
File-Format: application/pdf
Abstract: The endogeneity of capital retirements is studied for the particular case of oil tankers from 1979--1989. A model is estimated to examine the effect of changes in market conditions on the price and scrappage of tankers. Energy price rises had a major impact on the value of ships and on which ships were scrapped. A simple model is able to account for many features of the market. We use the information implicit in second-hand prices to ease the computational burden for the model that is estimated.
Handle: RePEc:nbr:nberwo:4194
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?
Author-Name: David Card
Author-Person: pca271
Note: LS
Number: 4195
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4195
File-URL: http://www.nber.org/papers/w4195.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, July 1996, vol.64, no.4, pp.957-980.
Abstract: This paper re-examines the connection between unions and wage inequality, focusing on three questions: (1) How does the union wage effect vary across the wage distribution? (2) What is the effect of unionism on the overall variance of wages at the end of the 1980s? (3) How much of the increase in the variance of wages over the 1970s and 1980s can be attributed to changes in the level and distribution of union coverage? Cross-sectional union wage gap estimates vary over the wage distribution, ranging from over 30 percent for lower wage workers to 10 percent for higher wage workers. Using a longitudinal estimation technique that accounts for misclassification errors in union status, I find that this variation represents a combination of a truly larger wage effect for lower-paid workers, and differential selection biases. The estimated effect of unions on the variance of wages in the late 1980s is relatively modest. Nevertheless, changes in the level and pattern of unionism--particularly the decline of unions among lower wage workers -- have been an important component of the growth in wage inequality. Changes in unionization account for one-fifth of the increase of the variance of adult male wages between 1973 and 1987.
Handle: RePEc:nbr:nberwo:4195
Template-Type: ReDIF-Paper 1.0
Title: Patterns and Determinants of Metropolitan House Prices, 1977-91
Author-Name: Patric H. Hendershott
Author-Name: Jesse M. Abraham
Note: LE
Number: 4196
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4196
File-URL: http://www.nber.org/papers/w4196.pdf
File-Format: application/pdf
Publication-Status: published as Proceedings of the 25th Annual Federal Reserve Bank of Boston Conference Browne and Rosengren, eds. (1993) pp. 18-42
Abstract: Real metropolitan house prices have been quite volatile during the 1977-91 period, with half of our 30 areas having annual increases of above 15 percent in a single year and a third having decreases greater than 7.5 percent. Drawing on Capozza and Helsley's models of real land prices, we express real house price changes as a function of the rate of change in employment, real income growth, real construction cost inflation, and changes in real after-tax interest rates. Our explanatory power varies widely by region. We do quite well for the half of our cities in the more stable Upper Midwest and Southeast, less well for the coastal cities, and dismally for the two Texas cities.
Handle: RePEc:nbr:nberwo:4196
Template-Type: ReDIF-Paper 1.0
Title: Policy Lessons from the U.S. Unemployment Experiments
Author-Name: Bruce D. Meyer
Author-Person: pme273
Note: LS PE
Number: 4197
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4197
File-URL: http://www.nber.org/papers/w4197.pdf
File-Format: application/pdf
Publication-Status: published as "Lessons from the US Unemployment Insurance Experiments," Journal of Economic Literature, vol 33, March 1995, pp 91-131.
Abstract: Recently, there has been extensive experimental evaluation of reforms of the unemployment insurance (UI) system. The UI experiments can be divided into two main areas: reemployment bonuses and job search programs. The four reemployment bonus experiments offered payments to UI recipients who found jobs quickly and kept them for a specified period of time. The six job search experiments evaluated combinations of services including additional information on job openings, more job placements, and more extensive checks of UI eligibility. The bonus experiments show that economic incentives do affect the speed with which people leave the unemployment insurance rolls. They also show that speeding claimants' return to work appears to increase total earnings following the claim, but the evidence is less strong. They also suggest that the rate of pay on the new job is not adversely affected by an earlier return to work. Despite these encouraging results, I argue that the experiments do not show that permanent adoption of a reemployment bonus would be beneficial as they cannot account for the effect of a reemployment bonus on the size of the claimant population. The job search experiments test several reforms that appear more promising. Nearly all of the combinations of services and increased enforcement reduce UI receipt, and have benefits that exceed costs. The treatments which mainly increase enforcement of work search rules have small but often statistically significant effects. The experiments which focus more on providing services induce much larger reductions in UI receipt, but at a higher cost of services per claimant. Nevertheless, these experiments have very favorable ratios of benefits to costs.
Handle: RePEc:nbr:nberwo:4197
Template-Type: ReDIF-Paper 1.0
Title: Hubs and Spokes, and Free Trade in the Americas
Author-Name: Carsten Kowalczyk
Author-Name: Ronald J. Wonnacott
Note: ITI
Number: 4198
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4198
File-URL: http://www.nber.org/papers/w4198.pdf
File-Format: application/pdf
Abstract: This paper compares two possible formats for free trade in the Americas: a system of spokes surrounding a U.S. hub, and a free trade area. The paper identifies the sources of welfare change, and it argues that a country's attitude towards a system depends on whether the arrangement is a complement or a substitute trading club. The paper argues also that rent-seeking activities, and costs of administration and transportation, are likely to be higher in a hub-and-spoke system than in a free trade area.
Handle: RePEc:nbr:nberwo:4198
Template-Type: ReDIF-Paper 1.0
Title: Participation in and Contributions to 401(k) Pension Plans: Evidence om Plan Data
Author-Name: Leslie E. Papke
Author-Person: ppa153
Note: AG
Number: 4199
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4199
File-URL: http://www.nber.org/papers/w4199.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, vol. 30, no. 2, Spring 1995, pp. 311-325.
Abstract: 401(k) plans differ from traditional employer-sponsored pension plans in that employees are permitted to make pre-tax contributions and the employer may match pan of the contribution. Since participation in these plans is voluntary, the sensitivity of participation and contributions to plan characteristics - notably the employer matching rate -- will play a critical role in retirement saving. Using plan level data from Form 5500s filed annually with the Internal Revenue Service, I find that there is potential for expanding retirement saving through 401(k) plans although there is evidence that the Tax Reform Act of 1986 reduced their attractiveness. Annual employee contributions were reduced by about 4 percent compared to the prior year after controlling for employer match rates. A simple model of employee contributions predicts that participation should increase with the match rate, and that, under reasonable assumptions, contributions will increase as well, but can eventually fall at higher match rates. I find evidence of both these effects. A .05 increase in the matching rate is associated with one to five percent increase in employee contributions.
Handle: RePEc:nbr:nberwo:4199
Template-Type: ReDIF-Paper 1.0
Title: International Wage Curves
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Andrew J. Oswald
Note: LS
Number: 4200
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4200
File-URL: http://www.nber.org/papers/w4200.pdf
File-Format: application/pdf
Publication-Status: published as Differences and Changes in Wage Structures, ed. Katz and Freeman, University of Chicago Press, 1995
Publication-Status: published as International Wage Curves, David G. Blanchflower, Andrew Oswald. in Differences and Changes in Wage Structures, Freeman and Katz. 1995
Abstract: The paper provides evidence for the existence of a negatively sloped locus linking the level of pay to the rate of regional (or industry) unemployment. This "wage curve" is estimated using microeconomic data for Britain, the US, Canada, Korea, Austria, Italy, Holland, Switzerland, Norway, and Germany, The average unemployment elasticity of pay is approximately -0.1. The paper sets out a multi-region efficiency wage model and argues that its predictions are consistent with the data.
Handle: RePEc:nbr:nberwo:4200
Template-Type: ReDIF-Paper 1.0
Title: Pension Plan Provisions and Retirement: Men & Women, Medicare, and Models
Author-Name: Robin L. Lumsdaine
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: David A. Wise
Author-Person: pwi45
Note: AG
Number: 4201
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4201
File-URL: http://www.nber.org/papers/w4201.pdf
File-Format: application/pdf
Publication-Status: published as Robin L. Lumsdaine & James H. Stock & David A. Wise, 1994. "Pension Plan Provisions and Retirement: Men and Women, Medicare, and Models," NBER Chapters, in: Studies in the Economics of Aging, pages 183-222 National Bureau of Economic Research, Inc.
Publication-Status: published as Studies in the Economics of Aging, David A. Wise, ed., University of Chicago Press 1994, P. 183
Abstract: The ongoing analysis of the effects of pension plan provisions on retirement is pursued in this paper. A primary objective of this paper is to test the validity of models previously developed and estimated with data from a Fortune 500 company, here using data from a second large company. The evidence confirms that changes in the retirement rates by age correspond closely to provisions of the firm pension plan. There is essentially no difference in the retirement behavior of men and women. As in previous work, it is found that simpler "option value model" of retirement yields very similar results to the considerably more complex stochastic dynamic programming specification. Both fit the data well and predict rather well the effect on retirement of a special retirement window plan, Some consideration is also given to the effects of firm health insurance and median coverage on retirement.
Handle: RePEc:nbr:nberwo:4201
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Cyclicality of Real Wages: How Important is Composition Bias
Author-Name: Gary Solon
Author-Person: pso215
Author-Name: Robert Barsky
Author-Person: pba670
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Note: ME EFG
Number: 4202
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4202
File-URL: http://www.nber.org/papers/w4202.pdf
File-Format: application/pdf
Publication-Status: published as Solon, Gary, Robert Barsky and Jonathan A. Parker. "Measuring The Cyclicality Of Real Wages: How Important Is Composition Bias?," Quarterly Journal of Economics, 1994, v109(1,Feb), 1-25.
Abstract: In the period since the 1960's, as in other periods, aggregate time series on real wages have displayed only modest cyclicality. Macroeconomists therefore have described weak cyclicality of real wages as a salient feature of the business cycle. Contrary to this conventional wisdom, our analysis of longitudinal microdata indicates that real wages have been substantially procyclical since the 1960's. We also find that the substantial procyclicality of men's real wages pertains even to workers that stay with the same employer and that women's real wages are less procyclical than men's. Numerous longitudinal studies besides ours have documented the substantial procyclicality of real wages, but none has adequately explained the discrepancy with the aggregate time series evidence. In accordance with a conjecture by Stockman (I983), we show that the true procyclicality of real wages is obscured in aggregate time series because of a composition bias: the aggregate statistics are constructed in a way that gives more weight to low-skill workers during expansions than during recessions. We conclude that, because real wages actually are much more procyclical than they appear in aggregate statistics, theories designed to explain the supposed weakness of real wage cyclicality may be unnecessary. and theories that predict substantially procyclical real wages become more credible.
Handle: RePEc:nbr:nberwo:4202
Template-Type: ReDIF-Paper 1.0
Title: Accuracy in the Determination of Liability
Author-Name: Louis Kaplow
Author-Person: pka44
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 4203
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4203
File-URL: http://www.nber.org/papers/w4203.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law and Economics, Vol. XXXVII, pp. 1-15, (April 1994).
Abstract: Many legal rules, notably rules of procedure and evidence, are concerned with achieving accuracy in the outcome of adjudication. In this article, we study accuracy in the conventional model of law enforcement. We consider why reducing error in determining liability is socially valuable and how error and its reduction affect the optimal probability and magnitude of sanctions.
Handle: RePEc:nbr:nberwo:4203
Template-Type: ReDIF-Paper 1.0
Title: Turnover and the Dynamics of Labor Demand
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Gerard Pfann
Author-Person: ppf10
Note: LS
Number: 4204
Creation-Date: 1992-10
Order-URL: http://www.nber.org/papers/w4204
File-URL: http://www.nber.org/papers/w4204.pdf
File-Format: application/pdf
Publication-Status: published as Economica, Vol.63, No.3, pp.359-367, August 1996.
Abstract: The theory of the dynamics of labor demand is based either on the costs of adjusting the level of employment or on the costs of hiring or firing (of gross changes in employment). We write down a generalized cost of adjustment function that includes both types of cost and allows for asymmetries in those costs. We derive the firm's rational-expectations profit - maximizing path of employment demand and the Euler equation whose parameters we estimate. Identifying the two types of costs requires complete data on turnover, which were available for the U.S. through 1981. We use these data for manufacturing to demonstrate that both types of adjustment cost figure in the representative firm's profit-maximizing decisions about employment, and that both types of cost are asymmetric (leading here to quicker increases than decreases in employment).
Handle: RePEc:nbr:nberwo:4204
Template-Type: ReDIF-Paper 1.0
Title: Privatization, Risk-Taking, and the Communist Firm
Author-Name: Dominique Demougin
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 4205
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4205
File-URL: http://www.nber.org/papers/w4205.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 55, no.2 pp. 203-231, October 1994
Abstract: This paper studies alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets. The methods include cash sales, a give-away scheme, and a participation contract where the government retains a sleeping fractional ownership in the firm. It is shown that, with competitive bidding, the participation contract dominates cash sales because it generates both more private restructuring investment and a higher expected present value of revenue for the government. Under weak conditions, the participation contract will induce more investment than the giveaway scheme, and it may even share the cash sales' virtue of incentive compatibility.
Handle: RePEc:nbr:nberwo:4205
Template-Type: ReDIF-Paper 1.0
Title: Capital Mobility in Neoclassical Models of Growth
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: N. Gregory Mankiw
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: EFG
Number: 4206
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4206
File-URL: http://www.nber.org/papers/w4206.pdf
File-Format: application/pdf
Publication-Status: published as The American Economic Review, vol. 85, no. 1, pp. 103-115, (March 1995).
Abstract: The empirical evidence reveals conditional convergence in the sense that economies grow faster per capita if they start further below their steady-state positions. For a homogeneous group of economies - like the U.S. states, regions of western European countries, and the GECD countries - the convergence is unconditional in that the poor economies grow faster than the rich ones. The neoclassical growth model for a closed economy fits these facts if capital is viewed broadly to encompass human investments, so that diminishing returns to capital set in slowly, and if differences in government policies or preferences about saving lead to heterogeneity in steady-state positions. Yet if the model is opened to allow for full capital mobility, then the predicted rates of convergence for capital and output are much higher than those observed empirically. We show that the open-economy model conforms with the evidence if an economy can use foreign debt to finance only a portion of its capital, even if 50% or more of the total. The problems in using human capital as collateral can explain the required imperfection in the credit market.
Handle: RePEc:nbr:nberwo:4206
Template-Type: ReDIF-Paper 1.0
Title: Why Exchange Rate Bands? Monetary Independence in Spite of Fixed Exchange Rates
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: IFM
Number: 4207
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4207
File-URL: http://www.nber.org/papers/w4207.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, vol. 33, 1994, pp. 157-199
Abstract: The paper argues that the reason real world fixed exchange rate regimes usually have finite bands instead of completely fixed exchange rates between realignments is that exchange rate bands, counter to the textbook result, give central banks some monetary independence, even with free international capital mobility. The nature and amount of monetary independence is specified, informally, and in a formal model, and quantified with Swedish krona data. Altogether the amount of monetary independence appears sizable. For instance, an increase in the Swedish krona band from zero to about plus or minus two percent may reduce the krona interest rate's standard deviation by about one-half.
Handle: RePEc:nbr:nberwo:4207
Template-Type: ReDIF-Paper 1.0
Title: Business Cycle Volatility and Openness: An Exploratory Cross-Section Analysis
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Andrew Rose
Author-Person: pro71
Note: IFM
Number: 4208
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4208
File-URL: http://www.nber.org/papers/w4208.pdf
File-Format: application/pdf
Publication-Status: published as Capital Mobility: The Impact on Consumption, Investment and Growth, ed. Leo Leiderman and Assaf Razin, pp. 48-75, Cambridge University Press, 1994
Abstract: This paper links business cycle volatility to barriers on international mobility of goods and capital. Theory predicts that capital market integration should lower consumption volatility while raising investment volatility, if most shocks are country-specific and transitory. The removal of barriers to trade in goods should enhance specialization and hence output volatility. We test these ideas using a unique panel data set which includes indicators of barriers to trade in both goods and capital flows. However, our empirical results indicate that neither the degree of capital mobility, nor the degree of goods mobility is strongly correlated with the volatility of consumption, investment or output. This may reflect the fact that many business cycle shocks are both persistent and common to many countries.
Handle: RePEc:nbr:nberwo:4208
Template-Type: ReDIF-Paper 1.0
Title: What Directions for Labor Market Institutions in Eastern and Central Europe?
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 4209
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4209
File-URL: http://www.nber.org/papers/w4209.pdf
File-Format: application/pdf
Publication-Status: published as The Transition in Eastern Europeedited by Olivier J. Blanchard, Kenneth A. Froot, and Jeffrey D. Sachs University of Chicago Press; forthcoming 1993
Publication-Status: published as What Direction for Labor Market Institutions in Eastern and Central Europe?, Richard B. Freeman. in The Transition in Eastern Europe, Volume 2, Restructuring, Blanchard, , and Sachs. 1994
Abstract: In this paper I examine the evolution of labor relations institutions during the initial phase of marketization in Poland, Hungary. and Czechoslovakia and develop a model of changing support for reforms during the transition to a market economy. I find surprising stability in labor institutions in the first stage of transition to a market economy, but dramatic changes in labor outcomes. Successor unions to the official trade unions remained on the union scene. Central government taxed wage increases so enterprises would not give increases that matched or exceeded inflation and instituted tripartite forums to seek consensus on labor issues -- as they had done under reform communism. By contrast, labor market outcomes changed greatly. State-owned enterprises reduced employment even absent privatization, producing sizeable joblessness and eliminating massive vacancies. The dispersion of wages increased substantially in Hungary and Poland though not in Czechoslovakia. My model of changing support for reforms predicts a U-shaped curve of support for a successful reform program, with support falling among those who fail to advance rapidly in the new economic environment. Given this pattern, I assess how different labor arrangements are likely to affect workers' tolerance for the costs of transition; the ability of those who suffer in transition to undertake mass protests; and to provide information to governments to change marketization programs that are failing through "voice". While many labor relations experts favor tripartite agreements that create a social consensus during transition. my analysis suggests that the most likely labor relations outcome in Eastern European marketizing economies will be quite different: weak and fragmented unionism, concentrated in the public sector, and little or no unionism in the growing private sector, save in large joint ventures.
Handle: RePEc:nbr:nberwo:4209
Template-Type: ReDIF-Paper 1.0
Title: Can the Markov Switching Model Forecast Exchange Rates?
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 4210
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4210
File-URL: http://www.nber.org/papers/w4210.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics. vol. 36, pp. 151-165. 1994
Abstract: A Markov-switching model is fit for eighteen exchange rates at quarterly and monthly frequencies. This model fits well in-sample at the quarterly frequency for many exchange rates. By the mean-squared-error or mean-absolute-error criterion. the Markov model does not generate superior forecasts at a random walk or at the forward rate. There appears to be some evidence that the forecast of the Markov model are superior at predicting the direction of change of the exchange rate.
Handle: RePEc:nbr:nberwo:4210
Template-Type: ReDIF-Paper 1.0
Title: Credit Conditions and the Cyclical Behavior of Inventories: A Case Studyof the 1981-82 Recession
Author-Name: Anil K. Kashyap
Author-Person: pka35
Author-Name: Owen A. Lamont
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: ME CF
Number: 4211
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4211
File-URL: http://www.nber.org/papers/w4211.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, 1994, vol CIX, no 3, pp 566-592
Abstract: This paper examines micro data on U.S. firms' inventories during different macroeconomic episodes. Much of the analysis focuses on the 1981-82 recession, a recession that was apparently precipitated by tight monetary policy. We find important cross-sectional effects in this period: firms that were "bank-dependent" were much more prone to shed inventories than their non-bank-dependent counterparts. In contrast, such cross-sectional differences are largely absent during a period of "loose" monetary policy later in the 1980s. Our findings are consistent with the view that 1) there is a bank lending channel of monetary policy transmission; 2) the lending channel is likely to be particularly important in explaining inventory fluctuations during downturns.
Handle: RePEc:nbr:nberwo:4211
Template-Type: ReDIF-Paper 1.0
Title: Alcohol, Marijuana, and American Youth: The Unintended Effects of Government Regulation
Author-Name: John DiNardo
Author-Person: pdi178
Author-Name: Thomas Lemieux
Author-Person: ple92
Note: EH
Number: 4212
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4212
File-URL: http://www.nber.org/papers/w4212.pdf
File-Format: application/pdf
Publication-Status: published as DiNardo, John and Thomas Lemieux. “Alcohol, Marijuana, and American Youth: the Unintended Consequences of Government Regulation." Journal of Health Economics 20 (November 2001): 991-1010.
Abstract: This paper analyzes the impact of increases in the minimum drinking age on the prevalence of alcohol and marijuana consumption among high school seniors in the United States. The empirical analysis is based on a large sample of students from 43 states over the years 1980- 1989. We find that increases in the minimum drinking age did reduce the prevalence of alcohol consumption. We also find, however, that increased legal minimum drinking ages had the unintended consequence of increasing the prevalence of marijuana consumption. We estimate a model based on the canonical theory of the consumer. Estimates from this model suggest that this unintended consequence is attributable to standard substitution effects. The estimates of the structural model also suggest that an increased drinking age helps create a climate of societal disapproval for all drug use, not only alcohol. We find that holding the consumption of alcohol constant, an increase in the drinking age reduces the prevalence of marijuana consumption. This effect is not large enough, however, to offset the large substitution toward marijuana induced by the decreased prevalence of alcohol consumption.
Handle: RePEc:nbr:nberwo:4212
Template-Type: ReDIF-Paper 1.0
Title: Are Rising Wage Profiles a Forced-Saving Mechanism?
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 4213
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4213
File-URL: http://www.nber.org/papers/w4213.pdf
File-Format: application/pdf
Abstract: This paper tests the hypothesis that rising earnings profiles are a mechanism by which individuals engage in forced saving. It does this by examining the cross-sectional relationship between overwithholding on income tax payments--behavior that is consistent with a preference for forced saving--and the slopes of age-earnings profiles. The force-saving hypothesis receives some support from earnings regression estimates. Individuals who receive tax refunds are on earnings profiles that are steeper and have lower intercepts, although the evidence is statistically significant in only a subset of the specifications estimated. On average, individuals who receive refunds have about one percentage point faster earnings growth per year.
Handle: RePEc:nbr:nberwo:4213
Template-Type: ReDIF-Paper 1.0
Title: Convergence in Growth Rates: The Role of Capital Mobility and International Taxation
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Chi-Wa Yuen
Note: EFG IFM PE
Number: 4214
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4214
File-URL: http://www.nber.org/papers/w4214.pdf
File-Format: application/pdf
Publication-Status: published as Capital Mobility: The Impact on Consumption, Investment and Growth, ed. Leo Leiderman and Assaf Razin, p. 237-257 Cambridge University Press, 1994
Abstract: We consider the role of capital mobility and international taxation. In explaining the observed diversity in long-term growth rates. Our major finding is that, under capital mobility, international differences in taxes will not matter for total growth differentials. Policy differences have a role to play in per capita growth differentials, however, when they lead to a divergence in the after-tax rates of return on capital across countries, as when the residence principle is adopted universally. When this is the case, how tax differences affect the growth rates of population and human capital will depend on the relative preference of the individual household towards these two engines of growth. Optimal tax policies are found to be growth-equalizing with and without policy coordination.
Handle: RePEc:nbr:nberwo:4214
Template-Type: ReDIF-Paper 1.0
Title: Private Saving and Public Policy
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: John Karl Scholz
Note: PE
Number: 4215
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4215
File-URL: http://www.nber.org/papers/w4215.pdf
File-Format: application/pdf
Publication-Status: published as Tax Policy and the Economy, Edited by James Poterba Volume 7, MIT Press (May 1993): 73-110.
Publication-Status: published as Private Saving and Public Policy, B. Douglas Bernheim, John Karl Scholz. in Tax Policy and the Economy, Volume 7, Poterba. 1993
Abstract: The evidence presented in this paper supports the view that many Americans, particularly those without a college education, save too little. Our analysis also indicates that it should be possible to increase total personal saving among lower income households by encouraging the formation and expansion of private pension plans. It is doubtful that favorable tax treatment of capital income would stimulate significant additional saving by this group. Conversely, the expansion of private pensions would probably have little effect on saving by higher income households. However, these households are more likely to increase saving significantly in response to favorable tax treatment of capital income. Currently, eligibility for IRAs is linked to an AGI cap, and pension coverage is more common among higher income households than among low income households. The most effective system for promoting personal saving would have precisely the opposite features. Extending tax incentives for saving to higher income households is problematic. We discuss three competing policy options, IRAs with AGI caps, the universal IRA, and the Premium Saving Account (PSA). Our analysis reveals that the PSA system is a more cost-effective vehicle for providing saving incentives to, all households, particularly those in the top quintile of the income distribution.
Handle: RePEc:nbr:nberwo:4215
Template-Type: ReDIF-Paper 1.0
Title: Union Membership in the United States: The Decline Continues
Author-Name: Henry S. Farber
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 4216
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4216
File-URL: http://www.nber.org/papers/w4216.pdf
File-Format: application/pdf
Publication-Status: published as Employee Representation: Alternatives and Future Directions, ed. Morris Kleiner and Bruce Kaufman, IRRA, 1993
Abstract: We use a demand/supply framework to analyze 1) the decline in union membership since 1977 in the United States and 2) the difference in unionization rates between the United States and Canada. We extend earlier work on these problems by analyzing new data for 1991 from the General Social Survey and for 1992 from our own household survey on worker preferences for union representation. When combined with earlier data for 1977 from the Quality of Employment Survey and for 1984 from a survey conducted for the AFL-CIO, we are able to decompose changes in unionization into changes in demand and changes in supply. We also analyze data for 1990 from a survey conducted for the Canadian Federation of Labor on the preferences of Canadian workers for union representation. We find that virtually all of the decline in union membership in the United States between 1977 and 1991 is due to a decline in worker demand for union representation. There was almost no change over this period in the relative supply of union jobs. Additionally, very little of the decline in unionization in the U.S. can be accounted for by structural shifts in the composition of the labor force. Next, we find that all of the higher unionization rate in the U.S. public sector in 1984 can be accounted for by higher demand for unionization and that there is actually more frustrated demand for union representation in the public sector. Finally. we tentatively conclude that the difference in unionization rates between the U.S. and Canada is accounted for roughly in equal measure by differences in demand and in supply.
Handle: RePEc:nbr:nberwo:4216
Template-Type: ReDIF-Paper 1.0
Title: Foreign Equity Investment Restrictions and Shareholder Wealth Maximization
Author-Name: Rene M. Stulz
Author-Name: Walter Wasserfallen
Note: IFM AP
Number: 4217
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4217
File-URL: http://www.nber.org/papers/w4217.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Studies, Vol. 8, No. 4, 1995, pp/ 1019-1058.
Abstract: This paper provides a theory of foreign equity investment restrictions. In a setting where the demand function for domestic shares differs between domestic and foreign investors, domestic entrepreneurs can maximize firm value by discriminating between domestic and foreign investors. The empirical implications of this theory are supported by evidence from Switzerland. In contrast to mean-variance asset pricing models, the model correctly predicts that the relaxation of foreign equity investment restrictions decreases the value of shares available to foreign investors.
Handle: RePEc:nbr:nberwo:4217
Template-Type: ReDIF-Paper 1.0
Title: Home Bias and the High Turnover
Author-Name: Linda L. Tesar
Author-Person: pte111
Author-Name: Ingrid M. Werner
Note: IFM
Number: 4218
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4218
File-URL: http://www.nber.org/papers/w4218.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, vol 14, no. 4, pp 467-492, 1995
Abstract: This paper documents the available evidence on international portfolio investment in five GECD countries. We draw three conclusions from the data. First. there is strong evidence of a home bias in national investment portfolios despite the potential gains from international diversification. Second, to the extent investors hold international securities, the composition of the portfolio of foreign securities seems to reflect factors other than diversification of risk. Third, the high volume of cross-border capital flows and the high turnover rate on foreign equity investments relative to domestic equity markets suggests that transactions costs and incomplete information are unlikely to be important deterrents to international investment. These observations suggest that a richer set of models is required to account for international investment behavior.
Handle: RePEc:nbr:nberwo:4218
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Spatial Model
Author-Name: Paul Krugman
Author-Person: pkr10
Note: ITI
Number: 4219
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4219
File-URL: http://www.nber.org/papers/w4219.pdf
File-Format: application/pdf
Abstract: Any interesting model of economic geography must involve a tension between "centripetal" forces that tend to produce agglomerations and "centrifugal" forces that tend to pull them apart. This paper explores one such model, and shows that the model links together a number of themes in the geography literature. These include: the role of market access, as measured by a measure of "market potential", in determining manufacturing location; the role of forward and backward linkages in producing agglomerations; the potential for "catastrophes", i.e., discontinuous changes in location in response to small changes in exogenous variables: and the idea that the economy is a "self-organizing system" that evolves a self-sustaining locational structure.
Handle: RePEc:nbr:nberwo:4219
Template-Type: ReDIF-Paper 1.0
Title: Permanent International Productivity Growth Differentials in an Integrated Global Economy
Author-Name: Willem H. Buiter
Author-Person: pbu137
Author-Name: Kenneth M. Kletzer
Note: ITI EFG
Number: 4220
Creation-Date: 1992-11
Order-URL: http://www.nber.org/papers/w4220
File-URL: http://www.nber.org/papers/w4220.pdf
File-Format: application/pdf
Publication-Status: published as Scandinavian Journal of Economics, vol 95, no. 4, 1993, pp. 467-493
Abstract: The paper analyzes the role of differences in household behavior as a source of persistent and even permanent differences between national or regional productivity growth rates, when there are constant static returns to scale in production and costless international diffusion of technology. A binding self-financing constraint on human capital formation can account for permanent international productivity growth differentials. An alternative mechanism is the nontradedness of an essential input, such as human capital, in the growth process. Differences in national policies toward private saving (whether through lump-sum intergenerational redistribution or through the taxation of financial asset income), toward the subsidization of human capital formation (student loans) and toward the free provision of public sector inputs in the human capital formation process also influence the long-run growth differentials.
Handle: RePEc:nbr:nberwo:4220
Template-Type: ReDIF-Paper 1.0
Title: Expenditures on Health Care for Children and Pregnant Women
Author-Name: Eugene M. Lewit
Author-Name: Alan C. Monheit
Note: EH
Number: 4221
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4221
File-URL: http://www.nber.org/papers/w4221.pdf
File-Format: application/pdf
Publication-Status: published as The Future of Children, vol. 2, no. 2, (1992), p. 95-114
Abstract: The chronic health care crisis in the United States is primarily the result of rapidly rising health care costs which leave millions of children and pregnant women without health insurance, with restricted access to health care, and at risk for poor health. A better understanding of the current system is key to any reform effort. The authors analyze estimates of annual expenditures on medical care services for children covering the period from conception through age 18 years, including expenditures on pregnancy and delivery. They focus their attention on the distribution of health care expenditures by type of service and source of payment, on how expenditures differ for children of different ages and for adults, and on the rate of growth in expenditures on health care for children. The authors suggest that, because there has been a decline in the relative share of expenditures accounted for by children, efforts to expand third-party financing of their health care will be less likely to overwhelm the system than would efforts to expand coverage to other groups. Families who are especially in need of extended health care coverage are those of children with major illnesses who are exposed to catastrophic costs. Efforts at cost containment may be most effective if focused on pregnancy and newborn care, areas in which expenditures have grown extremely rapidly in recent years. Finally, the authors conclude that, if expansion of health insurance coverage for children in the near term were to be incremental, expanded coverage for children 3 to 12 years old would probably have the smallest budgetary impact of any expansion in access to care.
Handle: RePEc:nbr:nberwo:4221
Template-Type: ReDIF-Paper 1.0
Title: Wages, Profits and Rent-Sharing
Author-Name: David G. Blanchflower
Author-Person: pbl22
Author-Name: Andrew J. Oswald
Author-Name: Peter Sanfey
Note: LS
Number: 4222
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4222
File-URL: http://www.nber.org/papers/w4222.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, February, 1996, vol.CXI(1), pp. 227-252.
Abstract: The paper uses CPS data from 1964 to 1985 to test for the existence of rent-sharing in US tabor markets, Using an unbalanced panel from the manufacturing sector, and random-effects and fixed-effects specifications, the paper finds that changes in wages are explained by movements in lagged levels of profitability and unemployment. The results appear to be consistent with rent-sharing theory (or a labor contract framework with risk-averse firms) and to be inconsistent with the competitive labor market model. The paper estimates the unemployment elasticity of pay at approximately -0.03, and the profit elasticity of pay at between 0.02 and 0.05.
Handle: RePEc:nbr:nberwo:4222
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy and Economic Growth
Author-Name: Eric M. Engen
Author-Name: Jonathan Skinner
Author-Person: psk23
Note: EFG
Number: 4223
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4223
File-URL: http://www.nber.org/papers/w4223.pdf
File-Format: application/pdf
Publication-Status: published as Taxation and Economic Growth, NTJ, Vol. 50, no. 4 (December 1997): 617- 642.
Abstract: One view of government fiscal policy is that it stifles dynamic economic growth through the distortionary effects of taxation and inefficient government spending. Another view is that government plays a central role in economic development by providing public goods and infrastructure. This paper develops a generalized model of fiscal policy and output growth that allows for (i) a positive or negative effect of government spending on private productivity, (ii) increasing or decreasing returns to scale, (iii) a transition path away from the equilibrium growth path, and (iv) intratemporal tax distortions. Using data from 107countries during the period 1970-85,and correcting for the potentially serious problem of endogeneity in government policy, we find that a balanced-budget increase in government spending and taxation is predicted to reduce output growth rates.
Handle: RePEc:nbr:nberwo:4223
Template-Type: ReDIF-Paper 1.0
Title: The Gender Earnings Gap: Some International Evidence
Author-Name: Francine D. Blau
Author-Person: pbl16
Author-Name: Lawrence M. Kahn
Author-Person: pka63
Note: LS
Number: 4224
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4224
File-URL: http://www.nber.org/papers/w4224.pdf
File-Format: application/pdf
Publication-Status: published as Blau, Francine D. and Lawrence M. Kahn, "Wage Structure and Gender Earnings Differentials: An International Comparison," Economica, vol. 63, no. 250 (supplement: Economic Policy and Income Distribution), pp. S29-S62, May 1996
Publication-Status: published as The Gender Earnings Gap: Some International Evidence, Francine D. Blau, Lawrence Kahn. in Differences and Changes in Wage Structures, Freeman and Katz. 1995
Abstract: This paper uses micro-data to analyze international differences in the gender pay gap among a sample of ten industrialized nations. We particularly focus on explaining the surprisingly low ranking of the U.S. in comparison to other industrialized countries. Empirical research on gender pay gaps has traditionally focused on the role of gender-specific factors, particularly gender differences in qualifications and differences in the treatment of otherwise equally qualified male and female workers (i.e., labor market discrimination). An innovative feature of our study is to focus on the role of wage structure--the array of prices set for various labor market skills--in influencing the gender gap. The striking finding of this study is the enormous importance of overall wage structure in explaining the lower ranking of U.S. women. Our results suggest that the U.S. gap would be similar to that in countries like Sweden, Italy and Australia (the countries with the smallest gaps) if the U.S. had their level of wage inequality. This insight helps to resolve three puzzling sets of facts: (1) U.S. women compare favorably with women in other countries in terms of human capital and occupational status: (2) the U.S. has had a longer and often stronger commitment to equal pay and equal employment opportunity policies than have most of the other countries in our sample; but (3) the gender pay gap is larger in the U.S. than in most industrialized countries. An important part of the explanation of this pattern is that the labor market in the U.S. places a much larger penalty on those with lower levels of labor market skills (both measured and unmeasured).
Handle: RePEc:nbr:nberwo:4224
Template-Type: ReDIF-Paper 1.0
Title: The State of the North American and Japanese Motor Vehicle Industries: A Partially Calibrated Model to Examine the Impacts of Trade Policy Changes
Author-Name: Melvyn Fuss
Author-Name: Steven Murphy
Author-Name: Leonard Waverman
Note: ITI PR
Number: 4225
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4225
File-URL: http://www.nber.org/papers/w4225.pdf
File-Format: application/pdf
Abstract: In this paper we utilize a three component model of the automotive industry to simulate the impacts of various trade policy scenarios, such as changes in tariffs and quotas, on the U.S. and Canadian motor vehicle sectors as compared to their Japanese competitors. The three components are a cost module, a mark-up module and a demand module. These models contain the features stressed by the "new" international trade literature: (I) economies of scale in production, (2) imperfect competition, and (3) product differentiation. As a result of these modelling details we are able to capture quantitatively a number of outcome characteristics stressed in the strategic trade literature. Scenarios which expand a country's output reduce unit costs of production, both in the short and long-run. Protectionist policies adopted by North American governments result in rent transfers to these countries. The price and output effects of scenarios which favour North American producers at the expense of Japanese producers however are moderated by the Japanese practices of partial pass-through and pricing-to-market. The welfare implications of the various scenarios are in accordance with the strategic trade literature, in the sense the protectionist policies can in some cases increase aggregate welfare in North America at the expense of Japan.
Handle: RePEc:nbr:nberwo:4225
Template-Type: ReDIF-Paper 1.0
Title: Trade and Technical Progress
Author-Name: John F. Helliwell
Author-Person: phe368
Note: ITI EFG
Number: 4226
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4226
File-URL: http://www.nber.org/papers/w4226.pdf
File-Format: application/pdf
Publication-Status: published as L. Pasinetti and R. Jolow, eds., Economic Growth and the Structure of Long-Term Development, London: Macmillan, 1994, pp.253-271.
Abstract: Using annual data 1963-1989 for technical progress in GECD countries (as measured by Solow residuals constructed using GECD data made internationally comparable through the use of purchasing power parties), the paper first shows that there has been significant international convergence in the rates of technical progress, with the initially poorer countries having faster technical progress. Country effects are found to be more significant than year effects, so subsequent analysis of the effects of trade on the growth of technology are done using 27 annual cross-sections of 19 countries each, with cross-equation restrictions applied and tested. The results suggest that both the level data and rate of increase in trade intensity lead to more rapid technical progress, with some additional effect from country size. Finally, there appears to be no evidence that countries with higher investment rates have had faster rates of technical progress, once the capital-deepening effects of investment have been taken into account via the production function used to define the Solow residuals.
Handle: RePEc:nbr:nberwo:4226
Template-Type: ReDIF-Paper 1.0
Title: Tax Distortions to the Choice of Organizational Form
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: Jeffrey K. MacKie-Mason
Author-Person: pma1
Note: PE
Number: 4227
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4227
File-URL: http://www.nber.org/papers/w4227.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 55, no. 2, pp. 279-306, October 1994
Abstract: Income from corporate and noncorporate firms is treated very differently under the tax law. To what degree do firms change their form of organization in response? Since the relative tax treatment depends on the tax bracket of the investor, the answer will vary by the bracket of the owners. To estimate the role of taxes, we estimate what size the nontax advantage to incorporating must take in each industry so that forecasted choices for organizational form, aggregated over investors in different tax brackets, are consistent with the aggregate evidence. While these nontax costs can be large, noncorporate activity tends to be concentrated in industries where these costs are small, leading to little excess burden from the tax distortion to organizational form.
Handle: RePEc:nbr:nberwo:4227
Template-Type: ReDIF-Paper 1.0
Title: Entrepreneurship, Happiness and Supernormal Returns: Evidence from Britain and the US
Author-Name: David Blanchflower
Author-Person: pbl22
Author-Name: Andrew Oswald
Note: LS
Number: 4228
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4228
File-URL: http://www.nber.org/papers/w4228.pdf
File-Format: application/pdf
Abstract: Do entrepreneurs earn supernormal returns, or does competitive pressure ensure that entrepreneurs receive the same utility level as workers? If those who run their own businesses get supernormal returns (or 'rents') they should be happier than those who work as employees. The paper tests this hypothesis. It uses survey data from Britain and the USA to show that, in comparison with those in regular forms of employment, the self-employed report significantly higher levels of utility as proxied by overall satisfaction data.
Handle: RePEc:nbr:nberwo:4228
Template-Type: ReDIF-Paper 1.0
Title: Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns
Author-Name: Daniel Feenberg
Author-Person: pfe56
Author-Name: James Poterba
Author-Person: ppo19
Note: LS PE
Number: 4229
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4229
File-URL: http://www.nber.org/papers/w4229.pdf
File-Format: application/pdf
Publication-Status: published as Tax Policy and the Economy, Vol. 7, edited by James Poterba. Cambridge, MA: The MIT Press, 1993.
Publication-Status: published as Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns, Daniel R. Feenberg, James M. Poterba. in Tax Policy and the Economy, Volume 7, Poterba. 1993
Abstract: This paper uses tax return data for the period 1951-1990 to investigate the rising share of adjusted gross income (AGI) that is reported on very high income tax returns. We find that most of the increase in the share of AGI reported by high-income taxpayers is due to an increase in reported income for the one quarter of one percent of taxpayers with the highest AGIs. The share of total AGI reported by these taxpayers rose slowly in the early 1980s, and increased sharply in 1987 and 1988. This pattern suggests that at least part of the increase in the income share of high-AGI taxpayers was due to the changing tax incentives that were enacted in the 1986 Tax Reform Act. By lowering marginal tax rates on top-income households from 50% to 28%, TRA86 reduced the incentive for these households to engage in tax avoidance activities. We also find substantial differences in the growth of the income share of the highest one quarter of one percent of taxpayers, and the share of other very high income taxpayers. This suggests that the increasing inequality of reported incomes at very high levels may not be driven by the same factors that have generated widening wage inequality throughout the income distribution and over a longer time period.
Handle: RePEc:nbr:nberwo:4229
Template-Type: ReDIF-Paper 1.0
Title: International Migration and International Trade
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: ITI LS
Number: 4230
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4230
File-URL: http://www.nber.org/papers/w4230.pdf
File-Format: application/pdf
Publication-Status: published as Chapter 15 in Handbook of Population Economics, ed. Mark Rosenzweig and Oded Stark, vol. 1, part 2, pp. 851-887, Elsevier, 1997
Abstract: This paper surveys key developments in the theory of international migration and international trade, and provides a few stylized facts. International migration, in many important cases, such as cross-country differences in productivity, can be a complement to international flows of commodities. In the presence of a productivity difference that is generated by an external economy effect of human, capital physical capital has weak incentives to flow from developed to underdeveloped countries while pressures for international migration from poor to rich countries are strong. The balancing factors underlying an efficient global dispersion of population are those which generate advantages to size, such as public goods, or increasing returns to scale on one hand, and those which generate disadvantages to size, such as immobile factors or congestion effects in the utilization of public services, on the other hand. The modem welfare state typically redistribute income from the rich to the poor in a way which attracts poor migrants from the less developed countries. Since migration could impose a toll on the redistribution policy of the Developed Country it may benefit from the extension of foreign aid to the Less Developed Country if this aid serves to finance a subsidy to workers in the Less Developed Country, thereby containing migration.
Handle: RePEc:nbr:nberwo:4230
Template-Type: ReDIF-Paper 1.0
Title: Real Exchange Rates and Relative Prices: An Empirical Investigation
Author-Name: Charles Engel
Author-Person: pen14
Note: ITI IFM
Number: 4231
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4231
File-URL: http://www.nber.org/papers/w4231.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 32, (August 1993), p. 35-50
Abstract: This paper uncovers a striking empirical regularity: the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country. This fact seems to hold for all goods except very simple, homogeneous products. Models of real exchange rates are likely to have predictions regarding this relation, so this fact may provide a useful gauge for discriminating among models.
Handle: RePEc:nbr:nberwo:4231
Template-Type: ReDIF-Paper 1.0
Title: Currency Substitution
Author-Name: Alberto Giovannini
Author-Name: Bart Turtelboom
Note: IFM
Number: 4232
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4232
File-URL: http://www.nber.org/papers/w4232.pdf
File-Format: application/pdf
Abstract: This paper reviews the extensive theoretical and empirical literature on currency substitution. After discussing the ambiguity surrounding the definition of currency substitution, the paper illustrates the causes of substitutability of different currencies using a cash-in-advance model and a model where money yields liquidity services. The effects of currency substitutability on exchange rates, international adjustment and the inflation tax are discussed. The paper also reviews the empirical facts on the size of currency substitution in developed and developing countries. Whereas currency substitution is found to be sizable in some developing countries and on the rise in the European Community, estimates of the ability to substitute foreign for domestic currency are often found to be unreliable due to data, methodological and conceptual problems. Policy implications of currency substitution for international monetary cooperation and inflationary finance are explored.
Handle: RePEc:nbr:nberwo:4232
Template-Type: ReDIF-Paper 1.0
Title: Specification of Policy Rules and Performance Measures in Multicountry Simulation Studies
Author-Name: Bennett McCallum
Note: IFM
Number: 4233
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4233
File-URL: http://www.nber.org/papers/w4233.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Money and Finance, Vol. 13, no. 3, pp. 259-275. (June 1994)
Abstract: Much recent analysis of international monetary and fiscal policy issues, such as the choice of an exchange-rate regime or the design of a policy coordination scheme, has been conducted by stochastic simulations with multicountry econometric models. In these studies it has become standard practice to consider alternative policy rules of a particular form that calls for departures of a policy instrument, from some "baseline" reference path, that are proportional to deviations of a specified target variable from its own baseline path. The present paper argues, however, that this standard rule form is seriously defective for evaluating such issues because the implied rules (I) often fail to be operational and (2) have associated performance measures that can be misleading in important cases. An example is presented that concerns the international "assignment problem" of optimally pairing instruments with policy objectives.
Handle: RePEc:nbr:nberwo:4233
Template-Type: ReDIF-Paper 1.0
Title: The Effect of News on Bond Prices: Evidence from the United Kingdom 1900-1920
Author-Name: Douglas Elmendorf
Author-Person: pel79
Author-Name: Mary Hirshfeld
Author-Name: David Weil
Author-Person: pwe24
Note: AP
Number: 4234
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4234
File-URL: http://www.nber.org/papers/w4234.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, June 1996, pp.341-344
Abstract: We study the relationship of non-quantitative news to bond prices. We select a set of major news events based solely on their significance as judged by historians, and examine the corresponding bond price movements. We find strong evidence that news has some influence on bond price movements, but we find no evidence that news can explain more than a small fraction of those movements.
Handle: RePEc:nbr:nberwo:4234
Template-Type: ReDIF-Paper 1.0
Title: Capital Budgets, Borrowing Rules, and State Capital Spending
Author-Name: James Poterba
Author-Person: ppo19
Note: PE
Number: 4235
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4235
File-URL: http://www.nber.org/papers/w4235.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, 56 (1995), pp 165-187.
Abstract: This paper uses cross-section data on the U.S. states to test the hypothesis that budgeting and borrowing rules affect the level and composition of public spending. It employs a 1963 data set with detailed information on state capital budgeting practices to compare capital spending in states that maintain separate budgets for capital and operating expenditures and states that employ a unified budget It also investigates the impact of financing rules, in particular pay-as-you-go rules for capital projects, on the level of spending. States with capital budgets tend to spend more on public capital, especially if they do not impose pay-as-you-go requirements for financing capital projects.
Handle: RePEc:nbr:nberwo:4235
Template-Type: ReDIF-Paper 1.0
Title: The Recent Failure of U.S. Monetary Policy
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: ME
Number: 4236
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4236
File-URL: http://www.nber.org/papers/w4236.pdf
File-Format: application/pdf
Publication-Status: published as De Economist, Vol. 141, No. 1, pp. 29-42 (1993).
Abstract: Since the spring of 1990, the rates of growth of real income, of nominal income, and of the broad monetary aggregate (M2) have been substantially less than the Federal Reserve had set as targets and than most observers regarded as appropriate. The breakdown of the traditional economic relations has not been between M2 and subsequent nominal GOP but between the increase in reserves caused by open market operations and the subsequent level of M2. Changes in bank reserves brought about by open market operations have had much less effect on the money supply than the Federal Reserve had anticipated. Because the Federal Reserve requirements apply to only about one-fifth of M2, the Federal Reserve lacks a reliable way of predicting the effect of open market operations on the subsequent change of M2. The Federal Reserve has therefore emphasized the statistical relation between changes in the federal funds rate and subsequent changes in the monetary aggregate and in economic activity. The federal funds rate has turned out once again to be a misleading indicator of monetary conditions and a poor way of guiding M2. The new bank capital standards and associated regulatory supervision may be the primary reasons for the reduced sensitivity of commercial bank lending and of total nominal spending to changes in open market operations. Banks have responded to open market purchases by increasing the ratio of Ml (which is subject to reserve requirements) to M2.
Handle: RePEc:nbr:nberwo:4236
Template-Type: ReDIF-Paper 1.0
Title: License Price Paths: I. Theory II. Evidence from Hong Kong
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Ling Hui Tan
Author-Person: pta161
Note: ITI
Number: 4237
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4237
File-URL: http://www.nber.org/papers/w4237.pdf
File-Format: application/pdf
Publication-Status: published as "The Dynamic Behavior of Licence Price Paths," Journal of Development Economics, 48(1996), pp. 301-321.
Abstract: In the first of the two companion papers, we show that the dynamic aspects of the license utilization decision in an uncertain environment, together with the usual policy of rewarding high license utilization with future license allocations. creates four components of the license price. These are the scarcity, asset, option, and renewal value components. Each of these components are identified and explored in the context of the existing literature. The effect of imperfections in the license market on license price paths is also explored. In the second paper, we use monthly data on license prices and utilization to test for the presence of imperfect competition in the market for apparel quota licenses in Hong Kong. A competitive structural model which respects the dynamic aspects of the problem is developed and estimated. We argue that concentration could affect the supply side as well as the demand side by affecting the cost associated with the search. The regressions indicate that concentration of license holdings affect the supply of licenses as predicted by models of imperfect competition. Since the implementation scheme encourages full utilization, imperfect competition affects the supply path of licenses rather than total supply. Concentration does not affect the demand side. which means that search costs are not an important consideration.
Handle: RePEc:nbr:nberwo:4237
Template-Type: ReDIF-Paper 1.0
Title: Trade Policy and the Third World Metropolis
Author-Name: Raul Livas Elizondo
Author-Name: Paul Krugman
Author-Person: pkr10
Note: ITI IFM
Number: 4238
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4238
File-URL: http://www.nber.org/papers/w4238.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Development Economics, Vol. 49, no. 1 (April 1996): 137-150.
Abstract: Many of the world's largest cities are now in developing countries. We develop a simple theoretical model, inspired by the case of Mexico, that explains the existence of such giant cities as a consequence of the strong forward and backward linkages that arise when manufacturing tries to serve a small domestic market. The model implies that these linkages are much weaker when the economy is open to international trade -- in other words, the giant Third World metropolis is an unintended by-product of import-substitution policies, and will tend to shrink as developing countries liberalize.
Handle: RePEc:nbr:nberwo:4238
Template-Type: ReDIF-Paper 1.0
Title: State Mandated Benefits and Employer Provided Health Insurance
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH PE
Number: 4239
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4239
File-URL: http://www.nber.org/papers/w4239.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, November 1994.
Abstract: One popular explanation for this low rate of employee coverage is the presence of numerous state regulations which mandate that group health insurance plans must include certain benefits. By raising the minimum costs of providing any health insurance coverage, these mandated benefits make it impossible for firms which would have desired to offer minimal health insurance at a low cost to do so. I use data on insurance coverage among employees in small firms to investigate whether this problem is an important cause of employee non-insurance. I find that mandates have little effect on the rate of insurance coverage; this finding is robust to a variety of specifications of the regulations. I also find that this lack of an effect may be because mandates are not binding, since most firms appear to offer these benefits even in the absence of regulation.
Handle: RePEc:nbr:nberwo:4239
Template-Type: ReDIF-Paper 1.0
Title: R&D Tax Policy During the Eighties: Success or Failure?
Author-Name: Bronwyn Hall
Author-Person: pha54
Note: PE PR
Number: 4240
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4240
File-URL: http://www.nber.org/papers/w4240.pdf
File-Format: application/pdf
Publication-Status: published as Tax Policy and the Economy, Edited by James Poterba Volume 7, pp. 1-35, (MIT Press, Cambridge), May 1993
Abstract: R&D Tax policy in the United States during the nineteen-eighties is evaluated. with particular emphasis placed on quantifying the impact of the R&D tax credit on the R&D investment of manufacturing firms. Using publicly available data on R&D spending at the firm level, I estimate an average price elasticity for R&D spending which is in the neighborhood of unity in the short run. Although the effective credit rate is small (less than five percent until 1990), this relatively strong price response means that the amount of additional R&D spending thus induced was greater than the cost in foregone tax revenue. The recent evolution of features of the U.S. corporate tax system which affect R&D is also reviewed and my results are compared with those of previous researchers. The conclusion is that R&D tax credit seems to have had the intended effect, although it took several years for firms to fully adjust. I also argue that although high correlation over time of R&D spending at the firm level makes it difficult to estimate long run effects precisely, the same high correlation makes it probable that these effects are large.
Handle: RePEc:nbr:nberwo:4240
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Fluctuations from Independent Sectoral Shocks: Self-Organized Criticality in a Model of Production and Inventory Dynamics
Author-Name: Peter Bak
Author-Name: Kan Chen
Author-Name: Jose Scheinkman
Author-Person: psc26
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG
Number: 4241
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4241
File-URL: http://www.nber.org/papers/w4241.pdf
File-Format: application/pdf
Publication-Status: published as Ricerche Economiche 47: 3-30 (1993)
Abstract: This paper illustrates how fluctuations in aggregate economic activity can result from many small, independent shocks to individual sectors. The effects of the small independent shocks fail to cancel in the aggregate due to the presence of two non-standard assumptions: local interaction between productive units (linked by supply relationships), and non-convex technology. We also argue that neither feature on its own would suffice. In the case of a simple model, we explicitly calculate the distribution of aggregate activity in the limit of an infinite number of independently disturbed sectors.
Handle: RePEc:nbr:nberwo:4241
Template-Type: ReDIF-Paper 1.0
Title: Dynamics of the Trade Balance and the Terms of Trade: The S-Curve
Author-Name: David Backus
Author-Person: pba242
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Finn E. Kydland
Author-Person: pky2
Note: IFM
Number: 4242
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4242
File-URL: http://www.nber.org/papers/w4242.pdf
File-Format: application/pdf
Publication-Status: published as "Dynamics of the Trade Balance and the Terms of Trade: the J Curve?" American Economic Review, 84 (March 1994) pp 84-103.
Abstract: We provide a theoretical interpretation of two features of international data: the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in the terms of trade, but positively correlated with past movements. We document these same properties in a two-country stochastic growth model in which trade fluctuations reflect, in large part, the dynamics of capital formation. We find that the general equilibrium perspective is essential: The relation between the trade balance and the terms of trade depends critically on the source of fluctuations.
Handle: RePEc:nbr:nberwo:4242
Template-Type: ReDIF-Paper 1.0
Title: Relative Price Movements in Dynamic General Equilibrium Models of International Trade
Author-Name: David K. Backus
Author-Person: pba242
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Finn E. Kydland
Author-Person: pky2
Note: ITI
Number: 4243
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4243
File-URL: http://www.nber.org/papers/w4243.pdf
File-Format: application/pdf
Publication-Status: published as R. van der Ploeg ed.: Handbook of International Macroeconomics(Blackwell 1994)
Abstract: We examine the behavior of international relative prices from the perspective of dynamic general equilibrium theory, with particular emphasis on the variability of the terms of trade and the relation between the terms of trade and net exports. We highlight aspects of the theory that are critical in determining these properties, contrast our perspective with those associated with the Marshall-Lerner condition and the Harberger-Laursen-Metzler effect, and point out features of the data that have proved difficult to explain within existing dynamic general equilibrium models.
Handle: RePEc:nbr:nberwo:4243
Template-Type: ReDIF-Paper 1.0
Title: A Tax-Based Test of the Dividend Signaling Hypothesis
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Adam Wantz
Note: PE CF
Number: 4244
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4244
File-URL: http://www.nber.org/papers/w4244.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review 85(3), june 1995, 532-551.
Abstract: We propose and implement a new test of the dividend signaling hypothesis that is designed to discriminate between dividend signaling and other theories that would account for the apparent existence of a dividend preference. Our test refines the use of data on stock price responses to dividend announcements. In particular, we study the effect of dividend taxation on the bang-for-the-buck, which we define as the share price response per dollar of dividends. Most dividend signaling models imply that an increase in dividend taxation should increase the bang-for-the-buck. In contrast, other dividend preference theories imply that an increase in dividend taxation should decrease the bang-for-the-buck. Since there have recently been considerable variation in the tax treatment of dividends, we are able to study dividend announcement effects under different tax regimes. Our central finding is that there is a strong positive relationship between dividend tax rates and the bang-for-the-buck. This result supports the dividend signaling hypothesis, and is consistent with alternatives. The paper also provides corroborating evidence based on the relationship between the bang-for-the-buck and bond ratings.
Handle: RePEc:nbr:nberwo:4244
Template-Type: ReDIF-Paper 1.0
Title: International Growth Linkages: Evidence from Asia and the OECD
Author-Name: John F. Helliwell
Author-Person: phe368
Note: IFM
Number: 4245
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4245
File-URL: http://www.nber.org/papers/w4245.pdf
File-Format: application/pdf
Publication-Status: published as NBER - Ease Asia Seminar on Economics, Volume 3 Macroeconomic Linkage: Saving, Exchange Rates and Capital Flowsedited by Takatoshi Ito and Anne O. Krueger University of Chicago Press; November 1993
Publication-Status: published as International Growth Linkages: Evidence from Asia and the OECD, John F. Helliwell. in Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, Ito and Krueger. 1994
Abstract: This paper first shows how the convergence model generally applicable to the OECD and in augmented form to global samples fails to reflect the post-1960 experience of the Asian economies, and then considers some of the factors explaining the differences. Investment rates in physical capital appear to be more important in explaining growth differences among the Asian economies, while education matters less. Various measures of openness to imports contribute importantly to explaining relative growth rates in Asia, with the more open economies generally having significantly faster growth rates, even after allowing for differences in investment rates. After allowing for differences in openness and investment rates, there also appears to be a trade-off between democracy and growth, with the initially less democratic Asian countries having faster subsequent growth, leading eventually to increasing effective demand for democratization.
Handle: RePEc:nbr:nberwo:4245
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates as Nominal Anchors
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: ITI IFM
Number: 4246
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4246
File-URL: http://www.nber.org/papers/w4246.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Sebastian. “Exchange Rates as Nominal Anchors." Weltwirtschaftliches Archiv 129, 1 (1993): 1-32.
Publication-Status: published as Sebastian Edwards, 1993. "Exchange rates as nominal anchors," Review of World Economics, vol 129(1), pages 1-32.
Abstract: This paper discusses the use of nominal exchange rates as nominal anchors in stabilization programs. The first part deals with the dynamics of inflation in highly indexed economies. It is shown that credible exchange rate anchors will reduce the degree of inflationary inertia. However, if some residual inertia is maintained in some contracts, real exchange rate overvaluation will result. Data from Chile, Mexico and Yugoslavia are used to test the implications of the model. The second part deals with the long run, and uses a 56 countries data set to investigate whether fixed exchange rates have been associated with greater financial discipline.
Handle: RePEc:nbr:nberwo:4246
Template-Type: ReDIF-Paper 1.0
Title: Corporate Control, Portfolio Choice, and the Decline of Banking
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Richard Rosen
Note: CF
Number: 4247
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4247
File-URL: http://www.nber.org/papers/w4247.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 50, no. 5 (1995): 1377-1420.
Abstract: In the last two decades U.S. banks have become systematically less profitable and riskier as nonbank competition has eroded the profitability of banks' traditional activities. Bank failures, insignificant from 1934, the date the Glass-Steagall Act was passed, until 1980, rose exponentially in the 1980s. The leading explanation for the persistence of these trends centers on fixed-rate deposit insurance: the insurance gives bank shareholders an incentive to take on risk when the value of bank charters falls. We propose and test an alternative explanation based on corporate control considerations. We show that managerial entrenchment, more than moral hazard associated with deposit insurance, explains the recent behavior of the banking industry.
Handle: RePEc:nbr:nberwo:4247
Template-Type: ReDIF-Paper 1.0
Title: Stoking the Fires? Co2 Emissions and Economic Growth
Author-Name: Douglas Holtz-Eakin
Author-Name: Thomas M. Selden
Author-Person: pse90
Note: ITI PE
Number: 4248
Creation-Date: 1992-12
Order-URL: http://www.nber.org/papers/w4248
File-URL: http://www.nber.org/papers/w4248.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, vol. 57, pp. 85-101, 1995
Abstract: Over the past decade, concern over potential global warming has focused attention on the emission of greenhouse gases into the atmosphere, and there is an active debate concerning the desirability of reducing emissions. At the heart of this debate is the future path of both greenhouse gas emissions and economic development among the nations. We use global panel data to estimate the relationship between per capita income and carbon dioxide emissions, and then use the estimated trajectories to forecast global emissions of CO2. The analysis yields four major results. First, the evidence suggests a diminishing marginal propensity to emit (MPE) CO2 as economies develop; a result masked in analyses that rely on cross-section data alone. Second, despite the diminishing MPE, our forecasts indicate that global emissions of CO2 will continue to grow at an annual rate of 1.8 percent. Third, continued growth stems from the fact that economic and population growth will be most rapid in the lower-income nations that have the highest MPE. For this reason, there will be an inevitable tension between policies to control greenhouse gas emissions and those toward the global distribution of income. Finally, our sensitivity analyses suggest that the pace of economic development does not dramatically alter the future annual or cumulative flow of CO2 emissions.
Handle: RePEc:nbr:nberwo:4248