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Template-Type: ReDIF-Paper 1.0
Title: The Demand for Pediatric Care: An Hedonic Approach
Author-Name: Fred Goldman
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 0134
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0134
File-URL: http://www.nber.org/papers/w0134.pdf
File-Format: application/pdf
Publication-Status: published as Goldman, Fred and Grossman, Michael. "The Demand for Pediatric Care: An Hedonic Approach." Journal of Political Economy, Vol. 86, No. 2, Part 1, (April 1978), PP. 259-280.
Abstract: The model that we develop is used to analyze properties of the demand functions for quantity and quality. It is then applied to study the demand for pediatric care -- physicians' services rendered to children.2The theoretical model of quantity -- quality substitution provides a frame-work for demand analysis whenever the market for a good is distinguished by a quality component. The analysis is developed within the household production framework of consumer behavior and assumes that parents both demand and produce quality children, where children's health is one aspect of their quality. Thus, the demand curves for pediatric care are derived from the interaction between the demand and production functions of children's health. In the analysis, we emphasize the effects of income, the price of pediatric services, and the time costs of obtaining these services on the quantity (measured in terms of visits) and quality of services demanded.
Handle: RePEc:nbr:nberwo:0134
Template-Type: ReDIF-Paper 1.0
Title: Inflation, Tax Rules, and the Long Term Interest Rates
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 0232
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0232
File-URL: http://www.nber.org/papers/w0232.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Summers, Lawrence. "Inflation, Tax Rules, and the Long-Term Interest Rate." Brookings Papers on Economic Activity, Vol. 1, (1978), pp. 61-109.
Publication-Status: published as Inflation, Tax Rules, and the Long-term Interest Rate, Martin Feldstein, Lawrence Summers. in Inflation, Tax Rules, and Capital Formation, Feldstein. 1983
Abstract: Although the return to capital is a focus of research in both macroeconomics and public finance, each specialty has approached this subject with an almost total disregard for the other's contribution. Macroeconomic studies of the effect of inflation on the rate of interest have implicitly ignored the existence of taxes and the problems of tax depreciation. Similarly, empirical studies of the incidence of corporate tax changes have not recognized that the effect of the tax depends on the rate of inflation and have ignored the information on the rate of return that investors receive in financial markets. Our primary purpose in this paper is to begin to build a bridge between these two approaches to a common empirical problem.
Handle: RePEc:nbr:nberwo:0232
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Pediatric Care Utilization
Author-Name: Ann D. Colle
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 0240
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0240
File-URL: http://www.nber.org/papers/w0240.pdf
File-Format: application/pdf
Publication-Status: published as Determinants of Pediatric Care Utilization, Ann D. Colle and Michael Grossman. in The Economics of Physician and Patient Behavior, Fuchs and Newhouse. 1978
Publication-Status: published as Ann D. Colle & Michael Grossman, 1978. "Determinants of Pediatric Care Utilization," The Journal of Human Resources, vol 13.
Abstract: The purpose of this paper is to understand the determinants of utilization of pediatric care -- care rendered to children by all physicians. Multivariate techniques are employed to examine four measures of pediatric care utilization in a national sample of children between the ages of 1 and 5. These measures are the probability of contacting a physician within the past year, the probability of obtaining a preventive physical examination within the past year, the number of office visits to physicians in private practice by children with positive visits, and the average quality of these visits.
Handle: RePEc:nbr:nberwo:0240
Template-Type: ReDIF-Paper 1.0
Title: Income and Race Differences in Children's Health
Author-Name: Linda N. Edwards
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 0308
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0308
File-URL: http://www.nber.org/papers/w0308.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Linda N. and Grossman, Michael. "Income and Race Differences in Children's Health in the Mid 1960s." Medical Care, Vol. 20, No. 9 (September 1982), pp. 915-930.
Abstract: In this paper we explore income and race differences in nine measures of the health of children aged 6 through 11. We show that when health measures from mid-childhood are the subject of analysis, both income and race differences are much less pronounced than they are in infant mortality and birth weight data. We do find differences in the health status of black and white children and of children from high and low income families, but these differences by no means overwhelmingly favor the white or high-income children. With respect to differences by race, whether or not they are adjusted for differences in associated socioeconomic factors, black children in many cases are in better health than their white counterparts, In the case of income differences in health, the high income children do appear to be in better health according to most measures, but their advantage is greatly diminished when one controls for related socioeconomic factors like parents' educational attainment. Even so, for measures relating to the "new morbidity," such as the presence of allergies or excessive tension, children from higher income families are in worse health.
Handle: RePEc:nbr:nberwo:0308
Template-Type: ReDIF-Paper 1.0
Title: How Elastic is The Demand for Labor?
Author-Name: Kim B. Clark
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 0309
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0309
File-URL: http://www.nber.org/papers/w0309.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Kim B. and Freeman, Richard B. "How Elastic is the Demand for Labor?" The Review of Economics and Statistics, Vol. LXII, No. 4, (November 1980) , pp. 509-520.
Abstract: This paper investigates the magnitude of the elasticity of demand for labor in time series data using more general and complete models of demand than have been previously employed. It argues that previous analyses have imposed two invalid constraints in calculations, which bias downward estimated elasticities. The first invalid constraint is the assumption that real capital prices have an equal opposite effect to real wages in the demand equation. We show on measurement error grounds that this constraint should not be imposed in econometric work even when long run homogeneity of prices correctly characterizes the market. The constraint is rejected in the data. The second invalid constraint is that all explanatory variables have the same lag distribution. We argue that this constraint is invalid when decisions are made under uncertainty and find that it is also rejected by the data. The principal positive empirical finding is that with the constraints relaxed, the elasticity, of demand with respect to real wages is much larger than the estimates in the literature, indicating much greater price responsiveness on the demand side of the labor market than has previously been thought.
Handle: RePEc:nbr:nberwo:0309
Template-Type: ReDIF-Paper 1.0
Title: Domestic Savings and International Capital Flows
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Charles Horioka
Author-Person: pho41
Note: PE ITI IFM
Number: 0310
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0310
File-URL: http://www.nber.org/papers/w0310.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Horioka, Charles. "Domestic Saving and International Capital Flows." The Economic Journal, Vol. 90, (June 1980), pp. 314-329.
Abstract: How internationally mobile is the world's supply of capital? Does capital flow among industrial countries to equalize the yield to investors? Alternatively, does the saving that originates in a country remain 'to be invested there? Or does the truth lie somewhere between these two extremes? The answers to these questions are not only important for understanding the international capital market but are also critical for analyzing a wide range of issues including the nation's optimal rate of saving and the incidence of tax changes.
Handle: RePEc:nbr:nberwo:0310
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Under Exchange Rate Flexibility
Author-Name: Rudiger Dornbusch
Note: ITI IFM
Number: 0311
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0311
File-URL: http://www.nber.org/papers/w0311.pdf
File-Format: application/pdf
Publication-Status: published as Dornbusch, Rudiger. "Monetary Policy under Exchange-Rate Flexibility." Managed Exchange-Rate Flexibility: The Recent Experience, Federal Reserve Bankof Boston, pp. 90-122, 1978.
Abstract: The continuing depreciation of the dollar stands out as one of the big policy issues. It has started to impinge on U.S. monetary policy; it influences the chances for international commercial diplomacy, and it is enhancing the move toward European monetary integration. Above all it leaves most observers with a puzzle as to the causes of the ongoing depreciation. This paper will, of course, not resolve the puzzle. ft rather attempts to layout the basic analytical framework that has been developed for the analysis of exchange-rate questions and to relate it to the question of monetary policy. Part I concentrates on the development of the relevant theoretical framework. The main points to be made here are: (i) exchange rates are primarily deter-mined in asset markets with expectations playing a dominant role; (ii) the sharpest formulation of exchange-rate theory is the "monetary approach, "Chicago's quantity theory of the open economy; (iii) purchasing power parity is a precarious reed on which to hang short-term exchange-rate theory; (iv) the current account has just made it back as a determinant of exchange rates
Handle: RePEc:nbr:nberwo:0311
Template-Type: ReDIF-Paper 1.0
Title: Inflation and the Taxation of Capital Income in the Corporate Sector
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 0312
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0312
File-URL: http://www.nber.org/papers/w0312.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Summers, Lawrence. "Inflation and the Taxation of Capital Income in the Corporate Sector." National Tax Journal, Vol. 32, No. 4, (December 1979), pp. 445-470.
Publication-Status: published as Inflation and the Taxation of Capital Income in the Corporate Sector, Martin Feldstein, Lawrence Summers. in Inflation, Tax Rules, and Capital Formation, Feldstein. 1983
Abstract: This detailed examination of the effect of inflation on the taxation of capital used by nonfinancial corporations considers not only the tax paid by the corporations them- selves but also the tax paid by the individuals and institutions that provide capital to the corporate sector. Although corporations deduct nominal interest payments that exceed real interest, the additional taxes that lenders pay slightly exceed the tax saving by corporate borrowers. Our calculations indicate that inflation raised the 1977 tax burden on corporate sector capital income by more than $32 billion, a 50 percent increase in the total tax burden.
Handle: RePEc:nbr:nberwo:0312
Template-Type: ReDIF-Paper 1.0
Title: A Note on Stochastic Rationing Mechanisms
Author-Name: Takatoshi Ito
Note: EFG
Number: 0313
Creation-Date: 1979-01
Order-URL: http://www.nber.org/papers/w0313
File-URL: http://www.nber.org/papers/w0313.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi. "An Example of a Non-Walrasian Equilibrium with Stochastic Rationing at the Walrasian Equilibrium Prices." Economic Letters, Vol. 2,(1979), pp. 13-19.
Abstract: There are a couple of well-known unsatisfactory properties in the notion of effective demand defined by Benassy and one by Dreze. This is why recent authors in disequilibrium analysis study the stochastic rationing mechanism. Douglas Gale proved the existence of the equilibrium with stochastic rationing mechanism. However, Gale 's rationing mechanism requires an economic agent to know all the individual effective demands from the other agents. This creates the informational problem. Green examined a rationing scheme which depends only on the individual effective demand and the aggregate signals. However, he did not consider conditions on rationing mechanisms to show the existence of temporary equilibrium. The purpose of this paper is to show a couple of sufficient conditions for the existence of temporary equilibrium preserving all properties Green considered on rationing mechanisms. We also discuss the possibility of balancing demand and supply in realization instead of in the mean.
Handle: RePEc:nbr:nberwo:0313
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Social Security on Private Savings: The Time Series Evidence
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 0314
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0314
File-URL: http://www.nber.org/papers/w0314.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "The Effect of Social Security on Private Savings: The Time Series Evidence." Social Security Bulletin, Vol. 42, No. 5, (May 1979),pp. 36-39.
Abstract: This paper reviews the studies by Robert Barro, Michael Darby, and Alicia Munnell, as well as my own earlier time-series study and presents new estimates using the revised national income-account data. The basic estimates of each of the four studies point to an economically substantial effect that is very unlikely to have been observed by chance alone. Although including variables like the Government surplus (Barro) or a measure of real money balance (Darby) can lower the estimated coefficient of the social security wealth variable, this paper explains their inappropriateness in the aggregate consumption function. Use of new data on national income and its components from the Department of Commerce improves my earlier estimates and shows that the unemployment variable does not belong in the consumption function once the level of income and its rate of change are included.
Handle: RePEc:nbr:nberwo:0314
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Analysis of the Fixed Coefficient 'Manpower Requirements' Model, 1960-1970
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 0315
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0315
File-URL: http://www.nber.org/papers/w0315.pdf
File-Format: application/pdf
Publication-Status: published as Richard B. Freeman, 1980. "An Empirical Analysis of the Fixed Coefficient "Manpower Requirements" Model, 1960-1970," The Journal of Human Resources, vol 15(2).
Abstract: The fixed coefficient 'manpower requirements" model has the advantage of providing information on the effect of changes in the industrial composition of an economy on demand for labor in highly disaggregated occupations, although at the cost of neglecting factor substitution. This study examines the ability of the fixed coefficient model to explain changes in employment in 3-digitoccupations in the United States from 1960 to 1970 and develops an "augmented requirements" model that uses changes in wages as well as fixed coefficient shifts in demand to analyze changes in employment. The study finds that (1) by themselves, the requirements shifts account for much of the change in employment among detailed occupations in the period studied; (2) demand for detailed skills is far from zero elastic; and (3) the fixed coefficient model seems to work, not because demand and supply are economically unresponsive, but because the variation in the wage structure and corresponding incentive to alter input coefficients is moderate relative to the variation in the shift in demand due to changes in industrial mix.
Handle: RePEc:nbr:nberwo:0315
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Demographic Factors on Age-Earnings Profiles
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 0316
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0316
File-URL: http://www.nber.org/papers/w0316.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. "The Effect of Demographic Factors on Age-Earnings Profiles." Journal of Human Resources, Vol XIV, No. 3, (1979), pp. 289-318.
Abstract: The age-earnings profile of male workers is significantly influenced by the age composition of the workforce. When the number of young workers increased sharply in the 1970s, the profile "twisted" against them, apparently because younger and older male workers are imperfect substitutes in production. The effect is especially marked among college graduates. By contrast, the age-earnings profile of female workers appears to be little influenced by the age composition of the female workforce, possibly because the intermittent work experience of women makes younger and older women closer substitutes in production. The dependence of the age-earnings profile on demographically induced movements along a relative demand schedule suggests that standard human capital models of the profile, which posit that earnings rise with age and experience solely as a result of individual investment behavior, are incomplete.
Handle: RePEc:nbr:nberwo:0316
Template-Type: ReDIF-Paper 1.0
Title: International Aspects Of Dividend Relief
Author-Name: Charles E. McLure, Jr.
Author-Person: pmc33
Note: ITI PE IFM
Number: 0317
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0317
File-URL: http://www.nber.org/papers/w0317.pdf
File-Format: application/pdf
Publication-Status: published as McLure, Jr., Charles E. "International Aspects of Dividend Relief." The Journal of Corporate Taxation, Vol. 7, No. 2, (Summer 1980), pp. 137-162.
Abstract: This article examines international aspects of the provision of relief from the double taxation of dividends that now occurs under the "classical" American system of taxing corporate income to both corporations and shareholders. It reviews recent American debate over integration and dividend relief, the systems of dividend relief now being used in Europe, and commonly accepted standards for judging international tax policy. These standards are employed in the appraisal of existing arrangements in Europe, possible alternative systems for international taxation in a world of dividend relief, and, using the European-American situation as an example, relations between countries with dividend relief and those with classical systems.
Handle: RePEc:nbr:nberwo:0317
Template-Type: ReDIF-Paper 1.0
Title: Information, Measurement, And Prediction In Economics
Author-Name: Victor Zarnowitz
Note: EFG
Number: 0318
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0318
File-URL: http://www.nber.org/papers/w0318.pdf
File-Format: application/pdf
Abstract: This paper examines the flow of production and use of economic information and analyzes the effects of measurement errors, particularly as transmitted through expectations and forecasts. Economic data are subject to a variety of errors, and the uncertainty about economic measures tends to increase further with the amount and complexity of the processing per-formed on the underlying data as well as with the distance between the user and the processor. With some exceptions, economic time series lag significantly behind their reference periods and many undergo large revisions. The effective information lag includes not only the time required for incremental data to be produced and transmitted but also the time required for the signals to be extracted by the user. This lag is substantial for many important series. In general, there is no presumption that the measurement errors are random: Systematic errors are frequent and their sources and forms vary so much that they may be difficult to detect. In times of strong shocks and surprising developments (such as occurred earlier in this decade),measurement of short-term changes in the economy is particularly difficult and current signals are apt to be often misinterpreted. This can result in broadly diffused decision errors which in time are discovered, leading to sharp corrective reactions. Aggregative predictions from well known and influential sources show certain common patterns of error, which suggests that forecasters react similarly to the observed events and unanticipated shocks. Fore-casts of GNP and related variables are adversely affected by errors in both the preliminary data and the base level estimates. There is some support here for the hypothesis that information lags play a significant role ingenerating business cycles, but it is important to note that the errors involved in predicting the future are typically much larger than the errors involved in estimating the present or recent past.
Handle: RePEc:nbr:nberwo:0318
Template-Type: ReDIF-Paper 1.0
Title: Applied Welfare Economics with Discrete Choice Models
Author-Name: Harvey S. Rosen
Author-Person: pro55
Author-Name: Kenneth A. Small
Author-Person: psm84
Note: PE
Number: 0319
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0319
File-URL: http://www.nber.org/papers/w0319.pdf
File-Format: application/pdf
Publication-Status: published as Small, Kenneth A. and Rosen, Harvey A. "Applied Welfare Economics with Discrete Choice Models." Econometrica, Vol. 49, No. 1, (January 1981), pp. 105- 130.
Abstract: Economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices. Such models are potentially very important in evaluating the impact of government programs upon consumer welfare. But very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations. This paper shows how the conventional methods of applied welfare economics can be modified to handle such cases. It focuses on the computation of the excess burden of taxation, and the evaluation of quality change. The results are applied to stochastic utility models, including the popular cases of probit and logit analysis. Throughout, the emphasis is on providing rigorous guidelines for carrying out applied work.
Handle: RePEc:nbr:nberwo:0319
Template-Type: ReDIF-Paper 1.0
Title: A State Price Index
Author-Name: Victor R. Fuchs
Author-Person: pfu157
Author-Name: Robert T. Michael
Author-Name: Sharon R. Scott
Number: 0320
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0320
File-URL: http://www.nber.org/papers/w0320.pdf
File-Format: application/pdf
Abstract: No cross-sectional consumer price index is currently available by state, and the BLS's cross-sectional "family budget" index for metropolitan areas is not well-suited for cross-state analyses. In this paper we propose an algorithm for constructing a state-specific Laspeyres price index using conveniently available information from the Census of Business and the Survey of Current Business. The index is calculated for each state (and for Census divisions and regions) for 1967 and 1972. Its characteristics are discussed, and it is used to deflate nominal per capita income by state. Comparing "real" income by state with nominal income by state, the former has substantially less variation cross-sectionally but greater variation over time (between 1967 and 1972).
Handle: RePEc:nbr:nberwo:0320
Template-Type: ReDIF-Paper 1.0
Title: The Efficient Level Of Public Library Services
Author-Name: Malcolm Getz
Author-Person: pge54
Number: 0321
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0321
File-URL: http://www.nber.org/papers/w0321.pdf
File-Format: application/pdf
Publication-Status: published as Getz, Malcom. "The Efficient Level of Public Library Services." Public Libraries: An Economic View, Chapter 4, Baltimore: Johns Hopkins University Press, (1980), pp. 72-103.
Abstract: Criteria for determining the efficient mix of branches, hours, stock, and new acquisitions are developed and applied to the branch operations of the New York Public Library. A method based on traveling costs is used to value library use at each branch. The relationship between library operations and library use is estimated using a two-stage technique. The costs of library operations are explored. Marginal benefit-cost ratios are presented. The study finds that the New York Public Library operates too many branches for too few hours of service.
Handle: RePEc:nbr:nberwo:0321
Template-Type: ReDIF-Paper 1.0
Title: Non-Trivial Equilibrium in an Economy With Stochastic Rationing
Author-Name: Seppo Honkapohja
Author-Person: pho12
Author-Name: Takatoshi Ito
Note: EFG
Number: 0322
Creation-Date: 1979-02
Order-URL: http://www.nber.org/papers/w0322
File-URL: http://www.nber.org/papers/w0322.pdf
File-Format: application/pdf
Abstract: Stochastic rationing when the market does not clear draws attention because both Dreze (1975) and Benassy (1975) quantity-constrained equilibria have some undesirable features. Gale (1978)gave the existence proof of trade under uncertainty. His stochastic rationing depends on all the individual effective demands. It is too vague to characterize a rationing mechanism. Moreover, his assumption to ensure a non-trivial equilibrium is economically not clear. In this paper we extend Green (1978) to characterizing the rationing scheme as the individual effective demand times the rationing number which is a function of the aggregate quantity signals. We also construct an economy with money and overlapping generations. We show the existence of the non-trivial equilibrium and provide an example of a non-Wairasian equilibrium at the Walrasian equilibrium prices.
Handle: RePEc:nbr:nberwo:0322
Template-Type: ReDIF-Paper 1.0
Title: Comparing Public Library Systems
Author-Name: Malcolm Getz
Author-Person: pge54
Number: 0323
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0323
File-URL: http://www.nber.org/papers/w0323.pdf
File-Format: application/pdf
Publication-Status: published as Getz, Malcom. "Comparing Public Library Systems." Public Libraries: An Economic View, Chapter 2, Baltimore: Johns Hopkins University Press, (1980), pp . 28-55.
Abstract: The operations of 31 large public library systems across the country are compared using information from the author' s interview survey. Operations are compared in physical terms: hours of service, materials, locations, and staffing. Differences in operations are found to be associated with differences in labor costs, local fiscal circumstances, and demographics. The libraries seem to reduce hours in the face of higher labor costs. Differences in the use of the libraries are found to be associated with differences in library services and demographics. The number of materials acquired per capita has a strong impact on library use.
Handle: RePEc:nbr:nberwo:0323
Template-Type: ReDIF-Paper 1.0
Title: Corporate Financial Policy, Taxes, and Uncertainty: An Integration
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Mervyn A. King
Note: PE
Number: 0324
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0324
File-URL: http://www.nber.org/papers/w0324.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and King, Mervyn. "Corporate Financial Policy with Personal and Institutional Investors." Journal of Public Economics, Vol. 17, No. 3 (April 1982), pp. 259-285.
Abstract: In this paper, we present a simple general equilibrium model of the portfolio behavior of households and institutions, paying particular attention to the influence of differences in tax rates and attitudes toward risk. Under the plausible assumptions that households are more risk averse than institutions and possess a greater relative "tax preference" for equity versus debt, we are able to characterize the equilibria which may result when debt is subject to bankruptcy risk. Among the issues which we study are the effects of tax rate changes, changes in risk, and changes in firm leverage on the relative asset holdings of the two types of investor and the rates of return earned on equity and debt. Numerical simulations provide additional understanding of the model's characteristics.
Handle: RePEc:nbr:nberwo:0324
Template-Type: ReDIF-Paper 1.0
Title: Analysis of Covariance With Qualitative Data
Author-Name: Gary Chamberlain
Note: LS
Number: 0325
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0325
File-URL: http://www.nber.org/papers/w0325.pdf
File-Format: application/pdf
Publication-Status: published as Chamberlain, Gary. "Analysis of Covariance With Qualitative Data." Review of Economic Studies, Vol. XLVII(1), No. 146 (January, 1980), pp. 225-238.
Abstract: In data with a group structure, incidental parameters are included to control for missing variables. Applications include longitudinal data and sibling data. In general, the joint maximum likelihood estimator of the structural parameters is not consistent as the number of groups increases, with a fixed number of observations per group. Instead a conditional likelihood function is maximized, conditional on sufficient statistics for the incidental parameters. In the logit case, a standard conditional logit program can be used. Another solution is a random effects model, in which the distribution of the incidental parameters may depend upon the exogenous variables.
Handle: RePEc:nbr:nberwo:0325
Template-Type: ReDIF-Paper 1.0
Title: A Capital Market In an Equilibrium Business Cycle Model
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG
Number: 0326
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0326
File-URL: http://www.nber.org/papers/w0326.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, Vol. 48, no. 6 (1980): 1393-1418.
Abstract: Previous equilibrium "business cycle" models are extended by the incorporation of an economy-wide capital market. One aspect of this ex-tension is that the relative price that appears in commodity supply and demand functions becomes an anticipated real rate of return on earning assets, rather than a ratio of actual to expected prices. From the stand-point of expectation formation, the key aspect of the extended model is that observation of the economy-wide nominal interest rate conveys current global information to individuals. With respect to the effect of money supply shocks on output, the model yields results that are similar to those generated in simpler models. Anew result concerns the behavior of the anticipated real rate of return on earning assets. Because this variable is the pertinent relative price for commodity supply and demand decisions, it turns out to be unambiguous that positive money surprises raise the anticipated real rate of return. In fact, this response provides the essential channel in this equilibrium model by which a money shock can raise the supply of commodities and thereby increase output. However, it is possible through a sort of "liquidity" effect that positive money surprises can depress the economy-wide nominal interest rate.
Handle: RePEc:nbr:nberwo:0326
Template-Type: ReDIF-Paper 1.0
Title: Sterling and the External Balance
Author-Name: Rudiger Dornbusch
Author-Name: Stanley Fischer
Note: ITI IFM
Number: 0327
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0327
File-URL: http://www.nber.org/papers/w0327.pdf
File-Format: application/pdf
Publication-Status: published as Dornbusch, Rudiger and Fischer, Stanley. "Sterling and the External Balance ." Britain's Economic Prospects Revisited, edited by Richard Caves and Lawrence Krause. Washington, D.C.: The Brookings Institution, 1980.
Abstract: This paper analyzes the behavior of the current account and the exchange rate in the British economy during the 1970's, and discusses the outlook, as influenced by the availability of oil revenues, for exchange rate developments during the 1980's.Both trade and exchange rate behavior are affected by, and in turn affect, general macroeconomic developments and policy problems. In the short term, the major macroeconomic problems of the British economy are its high rates of inflation and unemployment. Over the long term, the underlying problem for the British economy is its slow productivity growth relative to the major OECD economies (except that of the United States).Two major themes permeate this paper. First, the accepted laws of economics continue to work in the United Kingdom; for example, low domestic demand and increased British competitiveness improve the balance of payments and slow the fall of the exchange rate. Second, Britain's achievement of macroeconomic goals depends upon the behavior of both nominal and real wages. The inflation rate will remain low only if the rate of change of nominal wages does; full employment with stable prices and current account balance will be achieved only if real wage growth is restrained or productivity growth increases.
Handle: RePEc:nbr:nberwo:0327
Template-Type: ReDIF-Paper 1.0
Title: Public Libraries and Labor Markets
Author-Name: Malcolm Getz
Author-Person: pge54
Number: 0328
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0328
File-URL: http://www.nber.org/papers/w0328.pdf
File-Format: application/pdf
Publication-Status: published as Getz, Malcom. "Public Libraries and Labor Markets." Public Libraries: An Economic View, Chapter 3, Baltimore: Johns Hopkins Univeristy Press, (1980),pp. 56-71.
Abstract: Differences in labor compensation across 31 large public library systems are examined based on the author's interview survey. Salaries for recruit clerical workers, recruit librarians, and librarians with five years' experience are compared along with hours of work per week and fringe benefits. Cost of living differences in metropolitan areas and collective bargaining are found to be strongly associated with differences in labor compensation. The collective bargaining differential for experienced librarians seems to be about13.5 percent.
Handle: RePEc:nbr:nberwo:0328
Template-Type: ReDIF-Paper 1.0
Title: Money Stock Revisions and Unanticipated Money Growth
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Zvi Hercowitz
Author-Person: phe121
Note: EFG
Number: 0329
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0329
File-URL: http://www.nber.org/papers/w0329.pdf
File-Format: application/pdf
Publication-Status: published as as "Unanticipated Money Growth and Unemployment in the United States" American Economic Review, Vol. 67, no. 2 (1977): 101-115. (same new title as above) American Economic Review, Vol. 69, no. 5 (1979): 1004-1009. Also Journal of Monetary Economics, Vol. 6, no. 2 (1980): 257-268.
Abstract: An important "empirical regularity" is the strong positive effect of money shocks on output and employment. One strand of business cycle theory relates this finding to temporary confusions between absolute and relative price changes. These models predict positive output effects of unperceived monetary movements, but the quantitative importance of unperceived shifts in nominal aggregates is subject to question. Another strand of theory, based on long-term nominal contracts and analogous price-setting institutions, generates output effects from unanticipated, but not necessarily contemporaneously unperceived, money shocks. However, the real effects of unpredicted, but contemporaneously understood, monetary changes are not obviously consistent with efficient institutional arrangements. The present paper provides some empirical evidence on the two types of theories by analyzing the output effects associated with revisions in the money stock data, where the revisions are interpreted as components of unperceived monetary movements. The revisions turn out to have no significant explanatory power for output. Previous findings that innovations from an estimated money growth equation have a significant output effect remain intact when the revisions are included as separate explanatory variables. Overall, the study provides a small amount of evidence against the special role of unperceived, as opposed to unanticipated, money movements as a determinant of business fluctuations.
Handle: RePEc:nbr:nberwo:0329
Template-Type: ReDIF-Paper 1.0
Title: Unionization and Productivity: Microeconometric Evidence
Author-Name: Kim B. Clark
Note: LS
Number: 0330
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0330
File-URL: http://www.nber.org/papers/w0330.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Kim B. "Unionization and Productivity: Microeconometric Evidence." Quarterly Journal of Economics, (December 1980), pp. 615-639.
Abstract: It is widely agreed that unionization affects the rules and procedures governing the employment relation in organized establishments. The effect of these changes on establishment productivity, however, is unclear. Existing evidence is based on a comparison of union/non-union differences in value added per hour worked. Although positive union effects have been estimated, possible differences in prices and technology in the union and non-union sectors render the results inconclusive. The effect of unions on productivity is examined in the present paper using establishment level data from the U.S. cement industry. The cement industry provides a useful empirical framework. Output is easily measured in physical terms, and data on both union and non-union establishments permit estimation of the union effect controlling for differences in technology. The results suggest that unionized establishments are 6-8 percent more productive than their non-union counterparts. This conclusion is supported in time series data, where a comparison of productivity before and after unionization reveals a positive union effect of similar magnitude. Since the statistical analysis controls for capital-labor substitution, scale effects and technological change, the evidence suggests that unionization leads to productive changes in the operation of the enterprise. The results are relatively robust. Specification changes and adjustments for omitted variables leave the basic findings intact.
Handle: RePEc:nbr:nberwo:0330
Template-Type: ReDIF-Paper 1.0
Title: Corporate Supply of Index Bonds
Author-Name: Stanley Fischer
Note: PE
Number: 0331
Creation-Date: 1979-03
Order-URL: http://www.nber.org/papers/w0331
File-URL: http://www.nber.org/papers/w0331.pdf
File-Format: application/pdf
Publication-Status: published as Fischer, Stanley. "On the Nonexistence of Privately Issued Index Bonds inthe U.S. Capital Market." Inflation, Debt, and Indexation, edited by Rudiger Dornbusch and Mario Henrique Simonsen. Cambridge: M.I.T. Press, (1983),pp. 223-246.
Abstract: This paper develops a simple theory of the supply of index bonds by a firm, and uses that model to examine in some detail possible reasons for the non-existence of privately issued index bonds in the United States. The major elements of the theory involve the trade-off between the tax advantages of using debt finance and the increasing risk of bankruptcy debt finance involves. The theory is first used to examine the supply of nominal bonds -- it is thus a theory of the debt-equity ratio. Then the firm's optimal supply of index bonds is examined, and the values of the firm using the alternative debt instruments is compared. In general, there is no reason to think that nominal bonds dominate index bonds -- i.e. the theory cannot explain why firms have not issued index bonds. The paper then turns to a number of other reasons that have been advanced for the non-issue of indexed bonds in the United States, such as the tax treatment of such instruments and the argument that their issue would saddle the firm with open-ended obligations.
Handle: RePEc:nbr:nberwo:0331
Template-Type: ReDIF-Paper 1.0
Title: Unionization, Management Adjustment and Productivity
Author-Name: Kim B. Clark
Note: LS
Number: 0332
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0332
File-URL: http://www.nber.org/papers/w0332.pdf
File-Format: application/pdf
Publication-Status: published as Clark, Kim B. "The Impact of Unionization on Productivity: A Case Study." Industrial Journal of Economics, Vol. 33, No. 4, (July 1980), pp. 451-469.
Abstract: The effect of unionization on productivity is examined in this paper using time-series data on selected establishments in the U.S. cement industry. The analysis combines statistical estimation of the union impact and interviews with union and management officials to forge a link between econometric estimation and the traditional institutional analysis of union policy and management adjustment. The econometric analysis primarily deals with the problem of identifying the impact of the union in the face of firm specific effects and adjustments in labor quality. The case studies are designed to shed light on the question of how unionization affects productivity. The empirical results support the conclusion that unionization leads to productive changes in the operation of the enterprise. Evidence from the case studies suggests that much of the gain in productivity derives from a series of extensive changes in management personnel and procedure. These adjustments are a management response to changes in the employment contract which follow unionization.
Handle: RePEc:nbr:nberwo:0332
Template-Type: ReDIF-Paper 1.0
Title: Vehicle Currencies And the Structure Of International Exchange
Author-Name: Paul R. Krugman
Author-Person: pkr10
Note: ITI IFM
Number: 0333
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0333
File-URL: http://www.nber.org/papers/w0333.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Vol. 12, no. 3 (1980): 513-526.
Abstract: This paper is concerned with the reasons why some currencies, such as the pound sterling and the U.S. dollar, have come to serve as "vehicles" for exchanges of other currencies. It develops a three-country model of payments equilibrium with transaction costs, and shows how one currency can emerge as an international medium of exchange. Transaction costs are then made endogenous, and it is shown how the underlying structure of payments limits, without necessarily completely determining, the choice and role of a vehicle currency. Finally, a dynamic model is developed, and the way in which one currency can displace another as the international medium of exchange is explored.
Handle: RePEc:nbr:nberwo:0333
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Social Security on Saving
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 0334
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0334
File-URL: http://www.nber.org/papers/w0334.pdf
File-Format: application/pdf
Publication-Status: published as Martin Feldstein, 1980. "The Effect of Social Security on Saving," The Geneva Papers on Risk and Insurance - Issues and Practice, vol 5(1), pages 4-17.
Publication-Status: published as Feldstein, Martin. "The Effect of Social Security on Saving." Contemporary Economic Analysis III, London: Croom Helm, (1981).
Abstract: This paper, which was presented as the 1979 Frank Paish Lecture to the British Association of University Teachers of Economics, provides a non-technical summary of the recent studies of the effects of social security on private saving. The first section discusses the theoretical indeterminacy of the effect of social security while the second part reviews the empirical studies. Although the traditional life cycle theory of saving clearly implies that the anticipation of social security benefits reduces private saving, a richer theoretical framework suggests several reasons why the saving response cannot be unambiguously established by theoretical reasoning. These reasons include the indirect effects of social security on retirement behavior, private pensions, and gifts and bequests. The econometric studies resolve this uncertainty and indicate that social security appears to reduce private saving substantially. These studies include(1) aggregate time series evidence on the U.S. saving rates over the past 50 years, (2) microeconomic evidence on the accumulation of wealth by a large sample of individual households, and (3) international comparisons of saving rates in major industrial countries.
Handle: RePEc:nbr:nberwo:0334
Template-Type: ReDIF-Paper 1.0
Title: Feedback and the Use of Current Information: The Use of General Linear Policy Rules in Rational Expectations Models
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: ITI IFM
Number: 0335
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0335
File-URL: http://www.nber.org/papers/w0335.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples") Econometrica, Vol. 52, No. 3, (May 1984), pp. 665-680.
Abstract: The behavior of several stochastic dynamic rational expectations models is studied when policy behavior can be described by a linear rule. Four policy components are distinguished: a current response component, a feedback component, an open-loop component and a stochastic component. Policy is evaluated in terms of the current and asymptotic first and second moments of the state variables. The importance of distinguishing between variability and uncertainty is brought out. The conditional variance is argued to be the appropriate measure of uncertainty. The analysis is applied to a model of foreign exchange market intervention.
Handle: RePEc:nbr:nberwo:0335
Template-Type: ReDIF-Paper 1.0
Title: Analyzing the Accuracy of Foreign Exchange Advisory Services: Theory AndEvidence
Author-Name: Richard M. Levich
Note: ITI IFM
Number: 0336
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0336
File-URL: http://www.nber.org/papers/w0336.pdf
File-Format: application/pdf
Publication-Status: published as Levich, Richard M. "Analyzing the Accuracy of Foreign Exchange Advisory Services: Theory and Evidence." Exchange Risk and Exposure: Current Developments in International Financial Management, ed. by Richard M. Levich and Clas G. Wihlborg, (1980). Lexington Books, Lexington, MASS.
Abstract: With the introduction of floating exchange rates, the variability of unanticipated exchange rate changes has increased dramatically. A small forecasting industry has developed to provide information about future exchange rates. From an academic viewpoint, it is of interest to examine some of the statistical properties of these forecasts and to relate the forecast errors to other fundamental economic variables in a model with rational behavior. Second, from a more practical viewpoint, we would like to know if foreign exchange forecasts are useful to decision makers. The purpose of this paper is to provide an objective analysis which addresses some of the above questions for a large sample of forecasts. On the basis of the current research, we can draw several conclusions. First, most advisory service forecasts are not as accurate as the forward rate in terms of mean squared error. Second, judgmental forecasters are superior to econometric forecasters for short-term forecasts; the relationship is reversed for longer-term forecasts (one year). Third, two statistical tests indicate that the fraction of "correct" forecasts is significantly larger than what would be expected if the advisory services were only guessing at the direction of the future spot rate. In this sense, the forecast services appear to demonstrate expertise and usefulness. However, a full analysis of the risk-return opportunities available to advisory service users is still incomplete. It should be cautioned that if the forward rate contains a risk premium, then we expect advisory service models to beat the forward rate according to the tests we have outlined. In this case we must measure speculative returns relative to a risk measure. While advisory service forecasts may lead to profits, they may not be unusual after adjusting for risk.
Handle: RePEc:nbr:nberwo:0336
Template-Type: ReDIF-Paper 1.0
Title: Private versus Public Enforcement of Fines
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Note: LE
Number: 0338
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0338
File-URL: http://www.nber.org/papers/w0338.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell. "Private versus Public Enforcement of Fines." The Journal of Legal Studies, Vol. IX, No. 1, (January 1980), pp. 105-127.
Abstract: The present paper analyzes the competitive, monopolistic, and public enforcement of fines allowing for the costs of enforcement to differ by the choice of the enforcer. There are a number of reasons to expect such differences. First, the benefits from coordinating enforcement -- for example, avoiding duplication of investigative effort and exploiting economies of scale in information processing -- are obtained under public enforcement and monopolistic enforcement, but not under competitive enforcement. Second, the profit motive might be imagined to lead to lower costs under either form of private enforcement relative to public enforcement. Third, when the revenue from fines under public enforcement is not sufficient to finance enforcement costs, there may be a deadweight burden incurred in making up the deficit from other sources. Conversely, if the fine revenue exceeds enforcement costs, the effective cost of enforcement would be lower. On balance, these considerations suggest that monopolistic enforcement may be cheaper than competitive enforcement, but that public enforcement could be more or less expensive than private enforcement.
Handle: RePEc:nbr:nberwo:0338
Template-Type: ReDIF-Paper 1.0
Title: Unanticipated Money and Economic Activity
Author-Name: Robert J. Barro
Author-Person: pba251
Author-Name: Mark Rush
Author-Person: pru130
Note: EFG
Number: 0339
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0339
File-URL: http://www.nber.org/papers/w0339.pdf
File-Format: application/pdf
Publication-Status: published as Barro, Robert J. and Rush, Mark. "Unanticipated Money and Economic Activity ." Rational Expectations and Economic Policy, edited by Stanley Fischer, pp . 23-74. Chicago: University of Chicago Press, 1980.
Publication-Status: published as Unanticipated Money and Economic Activity, Robert J. Barro, Mark Rush. in Rational Expectations and Economic Policy, Fischer. 1980
Abstract: This paper discusses ongoing research on the relation of money to economic activity in the post-World War I1 United States. As in previous work, the stress is on the distinction between anticipated and unanticipated movements of money. Part I deals with annual data. Aside from updating and refinements of earlier analysis, the principal new results concern joint, cross-equation estimation and testing of the money growth, unemployment, output and price level equations. The present findings raise some doubts about the specification of the price equation, although the other relations receive further statistical support. Part I1 applies the analysis to quarterly data. Despite the necessity to deal with pronounced serial correlation of residuals in the equations for unemployment, output and the price level, the main results are consistent with those obtained from annual data. Further, the quarterly estimates allow a detailed description of the lagged response of unemployment and output to money shocks. The estimates reveal some lack of robustness in the price equation, which again suggests some misspecification of this relation.
Handle: RePEc:nbr:nberwo:0339
Template-Type: ReDIF-Paper 1.0
Title: Macro-Economic Adjustment With Import Price Shocks: Real and Monetary Aspects
Author-Name: Michael Bruno
Author-Name: Jeffrey Sachs
Note: ITI IFM
Number: 0340
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0340
File-URL: http://www.nber.org/papers/w0340.pdf
File-Format: application/pdf
Abstract: In this paper we explore in detail the various ways by which the introduction of intermediate imports affects the comparative statics and the dynamics of adjustment in an open economy. The importance of integrating the role of intermediate imports into a theory of macro-economic adjustment derives from the particular set of events that have affected the industrial economies in the 1970's -- the unprecedented rise in raw materials prices, in particular the oil price shock, and the concomitant inflation and widespread unemployment. The analysis lays out in detail the separate workings of the commodity labor and exchange rate markets, under various adjustment mechanisms, with the objective of obtaining empirically quantifiable hypotheses. An empirical study based on the present formulation has been prepared by the authors (see Bruno and Sachs (1979) ) .
Handle: RePEc:nbr:nberwo:0340
Template-Type: ReDIF-Paper 1.0
Title: On Activist Monetary Policy With Rational Expectations
Author-Name: Stanley Fischer
Note: EFG
Number: 0341
Creation-Date: 1979-04
Order-URL: http://www.nber.org/papers/w0341
File-URL: http://www.nber.org/papers/w0341.pdf
File-Format: application/pdf
Publication-Status: published as Fischer, Stanley. "On Activist Monetary Policy with Rational Expectations." Rational Expectations and Economic Policy, edited by Stanley Fischer, pp. 211-248. Chicago: University of Chicago Press, 1980.
Publication-Status: published as On Activist Monetary Policy with Rational Expectations, Stanley Fischer. in Rational Expectations and Economic Policy, Fischer. 1980
Abstract: The paper examines the case for activist monetary policy. It accepts the view that expectations are formed rationally, but not the implication of flexible price, equilibrium, rational expectations models, that monetary policy cannot and should not be used to affect real magnitudes. The paper starts by asking why the economy has not insulated itself from monetary disturbances through the adoption of indexing and other provisions that would effectively shorten contracts, and suggests that the costs of doing so must be substantial. These costs provide the rational for activist policy, whose aim should be to adjust for aggregate disturbances that the private sector has not made provision to handle. The arguments about activist policy then become those familiar from earlier discussions by Milton Friedman, concerning the long and variable lags with which policy operates, and the alleged propensity of the Fed to misbehave. It is argued that an activist policy that does not respond to minor disturbances, but does respond to actual and prospective major disturbances, would provide a stabilizing force for the economy.
Handle: RePEc:nbr:nberwo:0341
Template-Type: ReDIF-Paper 1.0
Title: High School Preparation and Early Labor Force Experience
Author-Name: Robert H. Meyer
Author-Name: David A. Wise
Author-Person: pwi45
Note: LS
Number: 0342
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0342
File-URL: http://www.nber.org/papers/w0342.pdf
File-Format: application/pdf
Publication-Status: published as Meyer, Robert H. and Wise, David A. "High School Preparation and Early Labor Force Experience." The Youth Labor Market Problem: Its Nature, Causes and Consequences, edited by Richard B. Freeman and David A. Wise, pp. 277-34 8. Chicago: University of Chicago Press, 1982.
Publication-Status: published as High School Preparation and Early Labor Force Experience, Robert H. Meyer, David A. Wise. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: The relationship between high school training and work experience on the one hand and early labor force experience on the other are analyzed in the paper. In addition, the extent and nature of the persistence of early labor force experience is evaluated. The study is based on data for male youths from the National Longitudinal Study of the High School Class of 1972. While there appears to be no relationship between job-related training in high school and post-graduation weeks worked or wage rates, there is a strong relationship between hours worked while in high school and both weeks worked and wage rates in the first four years after graduation. High school class rank and test scores also are positively related to early weeks worked and wage rates in the labor force. It is also found that after controlling for individual specific characteristics of youth, there is little relationship between weeks worked in the first year after high school graduation and weeks worked four years later. And there is almost no relationship between initial wage rates and wage rates four years later, other than those attributable to measured and unmeasured individual specific characteristics. There is little persistence of early experience that cannot be attributed to heterogeneity among youth. There is, however, an effect of early work experience on later wage rates, although it is of modest magnitude in this sample of high school graduates.
Handle: RePEc:nbr:nberwo:0342
Template-Type: ReDIF-Paper 1.0
Title: Coherency Conditions In Simultaneous Linear Equation Models With Endogenous Switching Regimes
Author-Name: C. Gourieroux
Author-Person: pgo144
Author-Name: Jean-Jacques Laffont
Author-Name: A. Monfort
Author-Person: pmo298
Note: EFG
Number: 0343
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0343
File-URL: http://www.nber.org/papers/w0343.pdf
File-Format: application/pdf
Publication-Status: published as Gourieroux, C., J. J. Laffont, and A. Monfort. "Coherency Conditions In Simultaneous Linear Equation Models with Endogenous Switching Regimes." Econometrica, Vo. 48, No. 1, (1980), pp. 75-96.
Abstract: In modeling disequilibrium macroeconomic systems which one would want to subject to econometric estimation one typically faces the problem of whether the structural model can determine a unique equilibrium. The problem inherits a special form because the regimes in which the equilibria can lie are each linear. By placing restrictions on the parameters that insure the uniqueness of such a solution for each value of the exogenous and random variables, we can improve the estimation procedure. This paper provides necessary and sufficient conditions for uniqueness -- or "coherency." These conditions are applied to a variety of models that have been prominent in the literature on econometrics with 'switching regimes' such as those of self-selectivity (Maddala), simultaneous equation tobit and probit (Amemiya, Schmidt) and multi-market macroeconomic disequilibrium (Gourieroux, Laffont and Nonfort).
Handle: RePEc:nbr:nberwo:0343
Template-Type: ReDIF-Paper 1.0
Title: Aggregation Effects And Panel Data Estimation Problems: An Investigationof the R&D Intensity Decision
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: PR
Number: 0344
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0344
File-URL: http://www.nber.org/papers/w0344.pdf
File-Format: application/pdf
Publication-Status: published as Pakes, Ariel. (1) "On the Asympotic Bias of Wald-Type Estimates of a Straight Line When Both Variables are Subject to Error." Inter. Econ. Rev. June 82, pp. 491-497. (2) "On Group Effects & Errors in Variables in Aggregation ." Rev. of Econ. & Statistics. February 1983, pp. 168-173.
Abstract: This paper considers why the determinants of the inter- and intra-industry variance in R&D intensity in U.S. manufacturing differ markedly even though response parameters are similar across industries. A similar aggregation effect is noted by Grunfeld and Griliches (1960), and this paper gives that effect operational content in terms of grouped data estimation procedures. Observationally equivalent aggregation results can be generated by errors in variables models (see Aigner and Goldfeld [1974]).A later section considers specifications which identify the empirical importance of both these problems. Finally, a summary of the empirical results on the determinants of R&D intensity is provided.
Handle: RePEc:nbr:nberwo:0344
Template-Type: ReDIF-Paper 1.0
Title: A Note on the Derivation of Linear Homogeneous Asset Demand Functions
Author-Name: Benjamin M. Friedman
Author-Name: V. Vance Roley
Note: ME
Number: 0345
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0345
File-URL: http://www.nber.org/papers/w0345.pdf
File-Format: application/pdf
Abstract: Among the numerous familiar sets of specific assumptions sufficient to derive mean-variance portfolio behavior from more general expected utility maximization in continuous time, the assumptions of constant relative risk aversion and joint normally distributed asset return assessments are also jointly sufficient to derive asset demand functions with the two desirable (and frequently simply assumed) properties of wealth homogeneity and linearity in expected returns. In addition, in discrete time constant relative risk aversion and joint normally distributed asset return assessments are sufficient to yield linear homogeneous asset demands as approximations if the time unit is small.
Handle: RePEc:nbr:nberwo:0345
Template-Type: ReDIF-Paper 1.0
Title: The Rate of Obsolescence Of Knowledge, Research Gestation Lags, and the Private Rate of Return to Research Resources
Author-Name: Ariel Pakes
Author-Person: ppa20
Author-Name: Mark Schankerman
Note: PR
Number: 0346
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0346
File-URL: http://www.nber.org/papers/w0346.pdf
File-Format: application/pdf
Publication-Status: published as Pakes, Ariel and Schankerman, Mark. "The Rate of Obsolescence of Knowledge, Research Gestation Lags, and the Private Rate of Return to Research Resources." R&D Patents & Productivity, edited by Zvi Griliches, Chicago: University of Chicago Press, (1984).
Publication-Status: published as The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources, Ariel Pakes, Mark Schankerman. in R&D, Patents, and Productivity, Griliches. 1984
Abstract: This paper points out the conceptual distinction between the rates of decay in the physical productivity of traditional capital goods and that of the appropriate revenues accruing to knowledge-producing activities, and notes that it is the latter parameter which is required in any study which constructs a stock of privately marketable knowledge. The rate of obsolescence of knowledge is estimated from a simple patent renewal and the estimates are found to be comparable to evidence provided by firms on the lifespan of the output of their R&D activities. These estimates, together with mean R&D gestation lags, are then used to correct previous estimates of the private excess rate of return to investment in research. We find that after the correction, the private excess rate of return to investment in research, at least in the early 1960's, was close to zero, which may explain why firms reduced the fraction of their resources allocated to research over the subsequent decade.
Handle: RePEc:nbr:nberwo:0346
Template-Type: ReDIF-Paper 1.0
Title: Technical Systems and Innovations in Public Libraries
Author-Name: Malcolm Getz
Author-Person: pge54
Number: 0347
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0347
File-URL: http://www.nber.org/papers/w0347.pdf
File-Format: application/pdf
Publication-Status: published as Getz, Malcom. "Technical Systems and Innovations in Public Libraries." Public Libraries: An Economic View, Chapter 5, Baltimore: Johns Hopkins University Press, (1980), pp. 104-141.
Abstract: The extent of use of twenty innovations in the operation of public libraries is examined in 31 large public library systems across the country. The innovations include the use of computers in ordering, cataloging, and circulating materials. The pattern of diffusion of the innovations across the systems is explored using contingency tables and discriminant analysis. All the large library systems seem to participate in early adoption of some innovations; none seem to be pace-setters for all innovations. The extent of diffusion of some innovations may be reduced by the development of successive innovations that replace them. Only some of the innovations seem to be climax technologies that are likely to persist for longer periods of time.
Handle: RePEc:nbr:nberwo:0347
Template-Type: ReDIF-Paper 1.0
Title: Can the Fed Control Real Interest Rates?
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: ME
Number: 0348
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0348
File-URL: http://www.nber.org/papers/w0348.pdf
File-Format: application/pdf
Publication-Status: published as Shiller, Robert J. "Can the Fed Control Real Interest Rates?" Rational Expectations and Economic Policy, edited by Stanley Fischer, pp. 117-168. Chicago: University of Chicago Press, 1980.
Publication-Status: published as Can the Fed Control Real Interest Rates?, Robert J. Shiller. in Rational Expectations and Economic Policy, Fischer. 1980
Abstract: Three hypotheses concerning the controllability of rationally expected real interest rates are examined here. These hypotheses, which are suggested by recent literature, assert in different senses that the stochastic properties of expected real interest rates are independent of the Fed policy rule. We discuss the meaning and implications of the hypotheses, and how they might be tested. Evaluation of the hypotheses is attempted by examination of the Fed's "quasi-controlled experiments," historical changes in policy regimes, Granger-Sims causality tests, Barro unanticipated money regressions, and other methods. Questions as to the relevance of any such methods are discussed.
Handle: RePEc:nbr:nberwo:0348
Template-Type: ReDIF-Paper 1.0
Title: The Incidence and Allocation Effects of a Tax on Corporate Distributions
Author-Name: David F. Bradford
Note: PE
Number: 0349
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0349
File-URL: http://www.nber.org/papers/w0349.pdf
File-Format: application/pdf
Publication-Status: published as Bradford, David F. "The Incidence and Allocation Effects of a Tax on Corporate Distributions." Journal of Public Economics, Vol. 15, No. 1, (February 1981), pp. 1-22.
Abstract: To study the effects of 'double taxation' (first at the corporation level, then at the shareholder level this paper analyzes a model with a tax on all corporate distributions to equity owners and no other taxes. Contrary to the common view, the tax is shown to have no substitution effect and, in particular, no effect on the corporate choice between debt and equity (via retained earnings) finance. The analysis opens to question certain arguments commonly used to support integration of corporation and individual income taxes via 'dividend relief'.
Handle: RePEc:nbr:nberwo:0349
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Variance-Age Profile of Lifetime Income
Author-Name: Benjamin Eden
Author-Person: ped25
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: LS
Number: 0350
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0350
File-URL: http://www.nber.org/papers/w0350.pdf
File-Format: application/pdf
Publication-Status: published as Eden, Benjamin and Pakes, Ariel. "On Measuring the Variance-Age Profile of Lifetime Income." Review of Economic Studies, Vol. XLVIII, (July 1981), pp. 385-394.
Publication-Status: published as Eden, Benjamin and Pakes, Ariel. "On Measuring the Variance-Age Profile of Lifetime Income." Social Policy Evaluation: An Economic Perspective, editedby Elhanan Helpman, Assaf Razin and Ephraim Sadkaj. New York: Academic Press, (1983).
Abstract: This paper presents an operational meaning to the concept of the variance in lifetime income in terms of the discounted variance of T mutually uncorrelated, sequentially realized, random variables. It is then shown how the logical implications of the lifecycle consumption model can be used to estimate this series of variances, called the variance-age profile of lifetime income, and we refer to an earlier paper by Eden (1977) to show how this variance-age profile can be used to compare the riskiness of alternative labor income paths. Finally the estimation technique is applied to Israeli data in order to compare the riskiness of the earnings path of those who attended college with that of those who terminated their education at the high school level in that economy, and to consider data requirements and estimation problems in greater depth.
Handle: RePEc:nbr:nberwo:0350
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Retirement: Evidence From the Canada Time Series
Author-Name: Anthony J. Pellechio
Number: 0351
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0351
File-URL: http://www.nber.org/papers/w0351.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Social Security and Household Wealth Accumulation: New Microeconomic Evidence")Review of Economics and Statistics, Vol. 61, no. 3(1979): 361-368.
Abstract: This study examines whether social security influences the aggregate retirement rate in Canada. The life-cycle model of individual behavior provides the foundation for this study. The model indicates how social security can affect an individual's decision to retire. Further, the model is used to specify the variable that measures this effect. This variable is social security wealth which equals the present value of the social security benefits to which an individual is entitled. The model for individual retirement decisions is used to construct a model for the aggregate retirement rate. Time series data from Canada include a measure of social security wealth that matches the specification given by the life-cycle model. The estimate of the model yields evidence that social security induces retirement. An increase in social security wealth of approximately $2300 per capita measured in 1971 dollars has been estimated to raise the retirement rate by 5 to 6 points. The effect of the creation of the Canada and Quebec Pension Plan was to raise the retirement rate by 1.5 points in 1967.
Handle: RePEc:nbr:nberwo:0351
Template-Type: ReDIF-Paper 1.0
Title: Time Preference and International Lending and Borrowing in an Overlapping-Generations Model
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: ITI IFM
Number: 0352
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0352
File-URL: http://www.nber.org/papers/w0352.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 89, No. 4, pp. 769-797, (August 1981).
Abstract: Two economies, represented by Diamond-type overlapping-generations models and differing only in their pure rates of time preference, are joined together. Capital formation, balance-of-payments behavior, and welfare are compared under autarky and openness. With a positive natural rate of growth, the low-time-preference country runs a current account surplus in the steady state but not necessarily outside it. If preexisting capital is not shiftable between countries, integration in the world economy makes the high-time-preference country worse off in the short run. The ranking of stationary utility levels under autarky and openness is ambiguous.
Handle: RePEc:nbr:nberwo:0352
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Determinants of Employee Performance
Author-Name: Charles Brown
Author-Person: pbr341
Note: LS
Number: 0353
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0353
File-URL: http://www.nber.org/papers/w0353.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Charles. "Estimating the Determinants of Employee Performance." Journal of Human Resources, Vol. XVII, No. 2 (Spring 1982), pp. 178-194.
Abstract: Employers often wish to know whether the factors used in selecting employees do in fact allow them to choose the most qualified applicants. Because the performance of those not chosen is not observed, sample-selection bias is a likely problem in any attempt to "validate" employee-selection criteria. With minor modifications, the recently-developed techniques for dealing with sample-selection problems can be used in this context. Using data on applicants for first-line supervisory positions and ratings of on-the-job performance of those hired, ordinary least squares estimates of the determinants of performance are compared with maximum-likelihood estimates which correct for selection bias. The correction for selection bias produces some appreciable improvements in some variables' coefficients, though the corrected estimates remain "insignificant" at conventional levels. Differences in the firm's stated and actual hiring criteria are also noted.
Handle: RePEc:nbr:nberwo:0353
Template-Type: ReDIF-Paper 1.0
Title: Optimal Inflation Policy
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: ME
Number: 0354
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0354
File-URL: http://www.nber.org/papers/w0354.pdf
File-Format: application/pdf
Publication-Status: published as Summers, Lawrence H. "Optimal Inflation Policy." Journal of Monetary Economics, Vol. 7, No. 2, (March 1981), pp. 175-194.
Abstract: This paper considers the problem of optimal long run monetary policy. It shows that optimal inflation policy involves trading off two quite different considerations. First, increases in the rate of inflation tax the holding of many balances, leading to a deadweight loss as excessive resources are devoted to economizing on cash balances. Second, increases in the rate of inflation raise capital intensity. As long as the economy has a capital stock short of the golden rule level, increases in capita intensity raise the level of consumption. Ignoring the second consideration leads to the common recommendation that the money growth rate be set so that the nominal interest rate is zero. Taking it into account can lead to significant modifications in the "full liquidity rule." Inter-actions of inflation policy with financial intermediation and taxation are also considered. The results taken together suggest that inflation can have important welfare effects, and that optimal inflation policy is an empirical question, which depends on the structure of the economy.
Handle: RePEc:nbr:nberwo:0354
Template-Type: ReDIF-Paper 1.0
Title: International Differences in Social Security and Saving
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 0355
Creation-Date: 1979-05
Order-URL: http://www.nber.org/papers/w0355
File-URL: http://www.nber.org/papers/w0355.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "International Differences in Social Security and Saving ." Journal of Public Economics, Vol. XIV, No. 2, (October 1980), pp. 225.24 4.
Publication-Status: published as International Differences in Social Security and Saving, Martin Feldstein. in Econometric Studies in Public Finance, Atkinson and Bradford. 1980
Abstract: The U.S. Social Security Administration, in cooperation with similar agencies in other countries, recently developed estimates of social security benefits for twelve major industrial countries. The present paper uses these data to estimate the effects of social security benefits on saving and retirement in an extended life cycle model. The parameter estimates indicate that, with retirement behavior given, social security significantly reduces private saving: an increase of the benefit-to-earnings ratio by 10 percentage points reduces the saving rate by approximately 3 percentage points.
Handle: RePEc:nbr:nberwo:0355
Template-Type: ReDIF-Paper 1.0
Title: International Trade and Income Distribution: A Reconsideration
Author-Name: Paul R. Krugman
Author-Person: pkr10
Note: ITI IFM
Number: 0356
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0356
File-URL: http://www.nber.org/papers/w0356.pdf
File-Format: application/pdf
Publication-Status: published as Krugman, Paul R. "Intraindustry Specialization and the Gains from Trade." Journal of Political Economy, Vol. 89, No. 5, (October 1981), pp. 959-973.
Abstract: The postwar expansion of trade among the industrial countries has not had the strong distributional effects which standard models of trade would have led us to expect. This paper develops a model which attempts to explain this observation, while at the same time making sense of some other puzzling empirical aspects of world trade. The basis of the model is a distinction between two kinds of trade: "Heckscher-Ohlin" trade, based on differences in factor proportions, and "intraindustry" trade, based on scale economies and product differentiation. To incorporate intraindustry trade into the model it is necessary to drop the usual assumptions of constant returns to scale and perfect competition; instead the paper deals with a world where economies of scale are pervasive and all firms possess some monopoly power. Surprisingly, it is nonetheless possible to develop a fully-worked-out general equilibrium model which remains simple and can be used to compare autarky and free trade. Two main results emerge from the analysis. First, the nature of trade depends on how similar countries are in their factor endowments. As countries become more similar, the trade between them will increasingly become intra-industry in character. Second, the effects of opening trade depend on its type. If intraindustry trade is sufficiently dominant the advantages of extending the market will outweigh the distributional effects, and the owners of scarce as well as of abundant factors will be made better off.
Handle: RePEc:nbr:nberwo:0356
Template-Type: ReDIF-Paper 1.0
Title: Labor Mobility and Wages
Author-Name: Jacob Mincer
Author-Name: Boyan Jovanovic
Note: LS
Number: 0357
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0357
File-URL: http://www.nber.org/papers/w0357.pdf
File-Format: application/pdf
Publication-Status: published as Mincer, Jacob and Jovanovic, Boyan. "Labor Mobility and Wages." Studies in Labor Markets, edited by Sherwin Rosen, pp. 21-63. Chicago: University of Chicago Press, 1981.
Publication-Status: published as Labor Mobility and Wages, Jacob Mincer, Boyan Jovanovic. in Studies in Labor Markets, Rosen. 1981
Abstract: In this essay we explore the implications of human capital and search behavior for both the interpersonal and life-cycle structure of inter-firm labor mobility. The economic hypothesis which motivates the analysis is that individual differences in firm-specific complementarities and related skill acquisitions produce differences in mobility behavior and in the relation between job tenure, wages and mobility. Both "job duration dependence" and "heterogeneity bias" are implied by this theory. Exploration of longitudinal data sets (NLS and MID) which contain mobility, job and wage histories of men in the 1966-76 decade yield several findings, among others: 1. The initially steep and later decelerating declines of labor mobility with working age are in large part due to the similar but more steeply declining relation between mobility and length of job tenure. 2. Given tenure levels, the probability of moving is predicted positively by the frequency of prior moves and negatively by education. The inclusion of prior moves in the regression reduces the estimated tenure slope because it helps to remove the "heterogeneity bias" in that slope. 3. The popular "mover-stayer model" is rejected by the existence of tenure effects on mobility. 4. Differences in mobility during the first decade of working life do not predict long-run differences in earnings. However, persistent movers at later stages of working life have lower wage levels and flatter life-cycle wage growth. 5. The analysis calls for a reformulation of earnings (wage) functions. Inclusion of tenure terms in the function permits separate estimates of returns to general and specific human capital after correction for heterogeneity bias. A rough estimate is that 50 percent of life-time wage growth is due to general (transferable) experience and 25 percent each to firm-specific experience and inter-firm mobility.
Handle: RePEc:nbr:nberwo:0357
Template-Type: ReDIF-Paper 1.0
Title: The Structure of Production, Technological Change, and the Rate of Growth of Total Factor Productivity in the Bell System
Author-Name: M. Ishaq Nadiri
Author-Name: Mark Schankerman
Note: PR
Number: 0358
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0358
File-URL: http://www.nber.org/papers/w0358.pdf
File-Format: application/pdf
Publication-Status: published as Nadiri, M. Ishaq and Mark Schankerman. "The Structure of Production, Technological Change, and the Rate of Growth of Total Factor Productivity in the Bell System," Productivity Measurement in Regulated Industries, ed. Thomas G. Cowing and Rodney E. Stevenson, New York: Academic Press, 1981.
Abstract: The objectives of this preliminary study are threefold. The first is to analyze empirically the production structure of the Bell System at the aggregate level. Particular attention is focused on the pattern of substitution among the factor inputs and the degree to which the aggregate production function is characterized by economies of scale. In this connection, we explore the role of research and development in the Bell System as an input in the production process, and its interaction with the traditional inputs. Second, we examine the impact of external technological chance on the production structure of the Bell System. The issues here include not only the rate of such technical change, but also the extent to which it alters the optimal level and mix of inputs, that is, the factor bias of external technical change. The third objective is to explore the inter relationship between scale economies internal to the Bell System and external technical change in determining the rate of growth of total factor productivity (TFP) . Specifically, we propose and illustrate a methodology for composing the observed growth of TFP into a part related to scale economies and a part included by technical change. We address these issues by first estimate in a an aggregate translog cost function for the Bell System, using annual data for the period 1947-1976. The implied estimate of the scale economies is then used to explore the sources of the growth of TFP.
Handle: RePEc:nbr:nberwo:0358
Template-Type: ReDIF-Paper 1.0
Title: Price Expectations, Foreign Exchange and Interest Rates, and Demand for Money in an Open Economy
Author-Name: Sebastian Arango
Author-Name: M. Ishaq Nadiri
Note: PR
Number: 0359
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0359
File-URL: http://www.nber.org/papers/w0359.pdf
File-Format: application/pdf
Publication-Status: published as Arango, Sebastian and M. Ishaq Nadiri. "Demand for Money in Open Economies," Journal of Monetary Economics, Vol. 7,No. 1, January 1981, pp. 69-83.
Abstract: Traditional studies on demand for money have often ignored influence of foreign monetary developments. The literature on international capital mobility, on the other hand, focuses on the impact of adjustments in international reserves on domestic money supply with the implicit assumption that aggregate demand for money is inelastic with respect to foreign monetary developments such as changes in exchange and foreign interest rates. These two views have often led to the conclusion that domestic monetary policy is fairly ineffective, and domestic financial markets are highly vulnerable to changes in foreign monetary developments. In this paper, the formulation of a demand function for real cash balances generalizes the traditional demand functions for money which explicitly take into account changes in exchange rates, foreign interest rates, and inflationary expectations. The underlying theoretical model is a general portfolio mode of asset holding which specifies the channels through which the influence of monetary developments abroad are transmitted to the supply and demand for money in a particular country. The demand function for real cash balances derived from this model is estimated using the tile series data for the period 1960-75 for Canada, United States, United Kingdom, and Germany. The results indicate that foreign monetary developments affect demand for money significantly, and considerable misspecification occurs when they are ignored. The results indicate that demand for real cash balances is not, as the traditional theory suggests, inelastic with respect to changes in foreign financial developments, and is fairly stable over the stressful period of 1970-75 when significant international monetary crises came in succession.
Handle: RePEc:nbr:nberwo:0359
Template-Type: ReDIF-Paper 1.0
Title: Contributions and Determinants of Research and Development Expenditures in the U.S. Manufacturing Industries
Author-Name: M. Ishaq Nadiri
Note: PR
Number: 0360
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0360
File-URL: http://www.nber.org/papers/w0360.pdf
File-Format: application/pdf
Publication-Status: published as Nadiri, M. Ishaq. "Contributions and Determinants of Research and Development Expenditures in the U.S. Manufacturing Industry," Capital Efficiency and Growth, ed George M. Von Furstenberg, Cambridge: Ballinger, 1980.
Abstract: This paper is an attempt to assess the contribution of R&D to growth of output in U.S. manufacturing industries. The important issues to address are: whether the slower growth of R&D expenditures in recent years has been the cause of slowdown in the growth of productivity, and what the factors are in explaining the slower growth of R&D expenditures. After a brief survey of the major issues on this topic, a production function is formulated and estimated using tine series cross-section data for the manufacturing industries. Also, the factors determining the rate of growth of R&D expenditures in the 1958-75 period are identified by formulating a dynamic model of demand for R & D activity. The estimation results indicate that the stock of R & D, as a measure of stock of knowledge, positively and strongly affect growth of output in total manufacturing, total durable, and total nondurable industries. Potential growth of output is affected because of the slowdown of growth of stock of R&D since 1966, but the gross rates of return on stock of R&D have not changed much in the 1966-75 period. Growth of output, changes in relative prices, cyclical fluctuations of the economy, as well as changes in level of employment and capital stocks are the factors affecting R&D expenditures. The effect of government financing of R&D on private decisions regarding R & D expenditures differs among different industries. By and large, the results on this issue are basically inconclusive and require further investigation.
Handle: RePEc:nbr:nberwo:0360
Template-Type: ReDIF-Paper 1.0
Title: New Evidence That Fully Anticipated Monetary Changes Influence Real Output After All
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 0361
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0361
File-URL: http://www.nber.org/papers/w0361.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 90, No. 6, pp. 1087-1117, (1982).
Abstract: Robert Barro in his three papers on the topic(AER 1977, JPE 1978, and 1978 conference paper with Mark Rush). A distinction is drawn between the Lucas-Sargent-Wallace (LSW) theory that only unanticipated monetary changes influence real output, and the orthodox view that anticipated monetary changes influence real output in the short run during the interval of adjustment of prices to the monetary change. The LSW proposition requires for its validity a contemporaneous and equiproportionate response of the expected price level to the anticipated level of money or nominal CNP, whereas the orthodox approach requires that price expectations depend at least partly on the past history of prices rather than entirely on the expected level of nominal demand. The results uniformly support the orthodox approach. The Livingston expectations series exhibits a highly significant response to past price changes, and only a slight response to current expectations about nominal GNP or money. The actual inflation rate also depends heavily on past price changes, with an insignificant impact of current expectations of nominal GNP, or money. The equations that relate real output to the deviation of changes of nominal income (both anticipated and unanticipated) from past price changes fit the data significantly better than Barro's approach using current and lagged values of money "surprises." The pure version of the LSW approach relating real output only to current surprises is decisively rejected.
Handle: RePEc:nbr:nberwo:0361
Template-Type: ReDIF-Paper 1.0
Title: The Family as an Incomplete Annuities Market
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Avia Spivak
Note: PE
Number: 0362
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0362
File-URL: http://www.nber.org/papers/w0362.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence J. and Avia Spivak. "The Family as an Incomplete Annuties Market." Journal of Political Economy, Vol. 89, No. 2, (April 1981), pp . 372-391.
Abstract: A new empirical study of the relation between money, nominal income, prices, and real output in postwar quarterly U.S. data rejects virtually all of the conclusions reached by Families provide individuals with risk sharing opportunities which may not otherwise be available. Within the family there is a degree of trust and a level of information which alleviates three key problems in the provision of insurance by markets open to the general public, namely, moral hazard, adverse selection, and deception. The informational advantages of pooling risk within families must be set against the inability of families to provide complete insurance because of the small size of the risk pooling group. This paper demonstrates how families can provide insurance against uncertain dates of death. Death risk sharing family arrangements effectively constitute an incomplete annuities market. Our analysis indicates that these arrangements even in small families can substitute by more than70% for complete annuities. Given the adverse selection problem and transactions costs in public annuity markets, risk pooling in families may well be preferred to purchasing market annuities. In the absence of organized public markets in annuities, these risk sharing arrangements provide powerful economic incentives for marriage and family formation. The paper suggests that inter-family transfers need have nothing to do with altruistic feelings; rather, they may simply reflect risk sharing behavior of completely selfish family members.
Handle: RePEc:nbr:nberwo:0362
Template-Type: ReDIF-Paper 1.0
Title: Can Productive Capacity Differentials Really Explain Earnings Differentials Associated with Demographic Characteristics? Case of Experience
Author-Name: James L. Medoff
Author-Name: Katharine G. Abraham
Author-Person: pab32
Note: LS
Number: 0363
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0363
File-URL: http://www.nber.org/papers/w0363.pdf
File-Format: application/pdf
Publication-Status: published as Medoff, James L. and Abraham, Katharine G. "Are Those Paid More Really More Productive? The Case of Experience." The Journal of Human Resources, Vol. XVI, No. 2, (Spring 1981), pp. 186-216.
Abstract: This study uses computerized personnel microdata on the white male managerial and professional employees at a major U.S. corporation to address the following question: Can the additional earnings which are associated with more labor market experience at a point in time really be explained by higher productivity at the same point in time? Our answer to this question, based on both cross-sectional and longitudinal information, is that performance plays a substantially smaller role in explaining cross-sectional experience-earnings differentials and earnings growth than is claimed by those who have adopted the human capital explanation of the experience-earnings profile. This response depends critically on our assumption that the performance ratings which supervisors give to their white male managerial and professional subordinates adequately reflect the subordinates' relative productivity in the year of assessment; we present a great deal of evidence which strongly supports this assumption.
Handle: RePEc:nbr:nberwo:0363
Template-Type: ReDIF-Paper 1.0
Title: The Two Faces of Unionism
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: James L. Medoff
Note: LS
Number: 0364
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0364
File-URL: http://www.nber.org/papers/w0364.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B., and James L. Medoff. "The Two Faces of Unionism." The Public Interest, Vol. 57, (Fall 1979), pp. 69-93.
Publication-Status: published as Freeman, Richard B., and James L. Medoff. "Le syndicalisme a deux visages." Revue Économique, Vol. 31, No. 3, (May 1980), pp. 505–39.
Abstract: Our research demonstrates that the view of unions as organizations whose chief function is to raise wages is seriously misleading. For in addition to raising wages, unions have significant non-wage effects which influence diverse aspects of modern industrial life. By providing workers with a voice both at the workplace and in the political arena, unions can and do affect positively the functioning of the economic and social systems. Although our research on the non-wage effects of trade unions is by no means complete and some results will surely change as more evidence becomes available, enough work has been done to yield the broad outlines of a new view of unionism.
Handle: RePEc:nbr:nberwo:0364
Template-Type: ReDIF-Paper 1.0
Title: Why is There A Youth Labor Market Problem?
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 0365
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0365
File-URL: http://www.nber.org/papers/w0365.pdf
File-Format: application/pdf
Publication-Status: published as The Youth Labor Market Problem in the United States: An Overview, Richard B. Freeman, James L. Medoff.
Publication-Status: published as The Youth Labor Market Problem in the United States: An Overview, Richard B. Freeman, James L. Medoff. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: This paper examines what is known about the causes of the high and increasing levels of youth joblessness and related problems in the youth labor market. Partly because of inconsistencies in reported rates of youth employment across surveys and partly because of problems in measuring key social variables, it is difficult to reach firm conclusions. As far as can be told, much of the relatively high rate of youth joblessness can be attributed to turnover and mobility patterns that are normal in the U.S. economy, but much is also directly related to a dearth of jobs. Demand forces, which have come to be neglected in favor of supply in much popular discussion of youth joblessness, are major determinants of variation in youth employment over time and among areas. For groups facing the most severe joblessness problems, however, the difficulty due to lack of jobs appears to be compounded by problems of employability related to deleterious social patterns. Surprisingly, perhaps, the factors that determine the probability that young persons end up employed or jobless differ substantively from those that determine wages. The paper explains the decline in the earnings of young workers relative to old workers in terms of the increased number of young persons. It speculates that the decline in relative wages may have contributed significantly to the stable ratio of employment to population among young whites. The causes of the downward trend in youth employment for nonwhites -- which constitute one of the major developments of the period -- remain a conundrum.
Handle: RePEc:nbr:nberwo:0365
Template-Type: ReDIF-Paper 1.0
Title: The Determination of Long-Term Interest Rates: Implications for Monetary and Fiscal Policies
Author-Name: Benjamin M. Friedman
Note: ME
Number: 0366
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0366
File-URL: http://www.nber.org/papers/w0366.pdf
File-Format: application/pdf
Publication-Status: published as Friedman, Benjamin M. "The Determination of Long-Term Interest Rates: Implications for Fiscal and Monetary Policies." Journal of Money, Credit, and Banking, Vol. XII, No. 2, (May 1980), pp. 331-352.
Abstract: The object of this paper is to bring to bear on financial-non financial interactions a richer approach to modeling the determination of long-term interest rates. in a series of previous papers. I have developed an alternative model based explicitly on the truism that any factor affecting long-term bond yields does so by (and only by) influencing some borrower's supply of bonds and/or some lender's demand for bonds. Rather than model the bond yield directly, as in the single-equation term-structure approach, this work instead models the supply of and the demand for bonds ,and determines the bond yield at the level necessary to equate resulting total supply and demand. The specific bond supplies and demands modeled in this work are those in the U .S. market for corporate bonds; this market is the primary source of long-term external lands to finance business fixed investment, and the corporate bond yield is also the long-term interest rate most frequently used in single-equation models of term-structure relationships. This paper reports the implications of this supply-demand model of long-term interest rate determination for the effectiveness of monetary and fiscal policies, as modeled in all other respects by the MJT-Penn-SSRC (henceforth MPS) econometric model of the United Stares. The new research tool applied in this paper is therefore altered MPS model from which the usual single term-structure equation has been removed and into which a supply-demand model of the bond market has been substituted. The only difference between this altered MPS model and the familiar NIPS model therefore lies in the determination of long-term asset yields and prices. Since these long-term yields and prices are such an important part of the overall bearing of financial market developments on nonfinancial behavior, however, the altered model exhibits interesting implications for fiscal and monetary policies.
Handle: RePEc:nbr:nberwo:0366
Template-Type: ReDIF-Paper 1.0
Title: Fixed and Flexible Rates: A Renewal of The Debate
Author-Name: Jacques R. Artus
Author-Name: John H. Young
Note: ITI IFM
Number: 0367
Creation-Date: 1979-06
Order-URL: http://www.nber.org/papers/w0367
File-URL: http://www.nber.org/papers/w0367.pdf
File-Format: application/pdf
Publication-Status: published as Artus, Jacques R. and Young, John H. "Fixed and Flexible Rates: A Renewal of the Debate." International Monetary Fund Staff Papers, Vol. 26, No. 4, (December 1979), pp. 654-698.
Abstract: The paper reviews the extent to which a decade of analysis and experience has altered thinking about the choice of an exchange rate system. The advantages of flexible rates are viewed to have been exaggerated. They do not permit governments to have permanently higher rates of economic activity at the expense of higher inflation as some thought. Further, the slow speed of adjustment to relative price changes limits the contribution of flexible rates to external adjustment in the short-run, and the degree of insulation from external influences that they provide. Finally, flexible rates tend to be fluctuating rates, and, although there is little empirical evidence so far showing that the fluctuations have had adverse effects on trade and capital flows, the exchange rate instability more than any other factor has led to a certain disillusionment with the floating rate system. Notwithstanding the drawbacks of flexible rates, there will be a continuing need for exchange rate flexibility over the next few years, and some analysis is given of the problems of achieving greater stability under flexible rates or the requisite amount of flexibility under pegged rates.
Handle: RePEc:nbr:nberwo:0367
Template-Type: ReDIF-Paper 1.0
Title: Optimal Tax Treatment of the Family: Married Couples
Author-Name: Michael J. Boskin
Author-Name: Eytan Sheshinski
Author-Person: psh109
Note: PE
Number: 0368
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0368
File-URL: http://www.nber.org/papers/w0368.pdf
File-Format: application/pdf
Publication-Status: published as Boskin, Michael J. and Eytan Sheshinski. "Optimal Tax Treatment of the Family: Married Couples." Journal of Public Economics, Vol. 20, (August 1983),pp. 281-297. Journal of Economic Literature, Vol. 22, No. 1, (March 1984) .
Abstract: This paper examines the appropriate tax treatment of the family in a series of analytical models and numerical examples. For a population of taxpaying couples which differ in earning capacity, we derive the optimal tax rates for each potential earner. These rates depend crucially upon own and cross labor supply elasticities and the joint distribution of wage rates. Our results suggest that the current system of income splitting in the United States, under which husbands and wives face equal marginal tax rates, is non-optimal. Using results from recent econometric studies, and allowing for a sensitivity analysis, the optimal tax rates on secondary workers in the family are much lower than those on primary earners. Indeed, our best estimate is that the secondary earner would face tax rates only one-half as high as primary earners.
Handle: RePEc:nbr:nberwo:0368
Template-Type: ReDIF-Paper 1.0
Title: Energy Prices, Inflation, and Recession, 1974-1975
Author-Name: Knut Anton Mork
Author-Name: Robert E. Hall
Note: EFG
Number: 0369
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0369
File-URL: http://www.nber.org/papers/w0369.pdf
File-Format: application/pdf
Publication-Status: published as Mork, Knut Anton and Hall Robert E. "Energy Prices, Inflation, and Recession, 1974-1975." The Energy Journal, Vol. 1, Iss. 3 (1980), pp. 31-64.
Abstract: The energy price shock depressed real output by two percent in 1974 and by five percent in 1975, according to our results. Prices rose by four percent in 1974 and by another two percent in 1975. These conclusions are derived from an aggregate model of the U.S. economy with an explicit role of energy in production. The distinction between expected and unexpected shocks is an important part of the model. We also examine monetary and fiscal policies that might have offset the energy shock.
Handle: RePEc:nbr:nberwo:0369
Template-Type: ReDIF-Paper 1.0
Title: The Decline in Aggregate Share Values: Inflation, Taxation, Risk and Profitability
Author-Name: Patric H. Hendershott
Note: PE ME
Number: 0370
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0370
File-URL: http://www.nber.org/papers/w0370.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. "The Decline in Aggregate Share Values: Taxation, Valuation Errors, Risk and Profitability." American Economic Review, (December 1981), pp. 909-922.
Abstract: With a neutral tax system an increase in observed and anticipated inflation would not be expected to alter either real after-tax yields on bonds and equities or the ratio of the market value of equities to the replacement cost of corporate real capital. In the real world, however, declines in real after-tax bond yields and the relative value of shares have been observed. Feldstein (1976, 1978) has attributed both of these phenonema to the use of historic-cost depreciation, and the taxation of nominal capital gains. Our analysis supports his conjecture regarding the decline in real after-tax debt yields, but rejects his analysis of the cause of the decline in share values. The decline in share values can be attributed to many factors, but the most important is probably the favorable taxation of income from owner-occupied housing (no taxation of either implicit rents nor real capital gains). As a result housing has become more attractive with the acceleration of inflation, and households have substituted housing for equity shares. Other possible sources of the decline in share values are reduced profitability of existing capital, owing to increased regulatory costs and real energy prices, and a greater perceived risk in business operations.
Handle: RePEc:nbr:nberwo:0370
Template-Type: ReDIF-Paper 1.0
Title: Sorting Models of Labor Mobility, Turnover, and Unemployment
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: ITI IFM
Number: 0371
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0371
File-URL: http://www.nber.org/papers/w0371.pdf
File-Format: application/pdf
Abstract: Utilizing a model in which individuals search among lotteries on likely success at different jobs, this paper analyzes both the search decision when unemployed and the implications of the sorting process. The model correctly predicts both the direction and convexity of the age-unemployment relationship and the impact of experience on turnover and wages. Actions taken when unemployed have an important impact on equilibrium turnover rates, unemployment rates, and the work history of the pool of unemployed. The sorting model is used to analyze racial differences in youth unemployment and major empirical features of low income labor markets.
Handle: RePEc:nbr:nberwo:0371
Template-Type: ReDIF-Paper 1.0
Title: The Old Age Security Hypothesis and Population Growth
Author-Name: Robert J. Willis
Author-Person: pwi192
Note: AG
Number: 0372
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0372
File-URL: http://www.nber.org/papers/w0372.pdf
File-Format: application/pdf
Abstract: In traditional societies it is often argued that parents' desire for old age security in the form of transfers from their children provides an important motive for childbearing. Some doubt has been cast on this "old age security hypothesis" by recent estimates which suggest that the rate of return on investments in children tend to be negative in most developing countries. This paper presents a theoretical model which integrates micro-level decision making about fertility and life cycle consumption into a dynamic macro-level model of overlapping generations in order to investigate the implications of this hypothesis. In this model, observation of a negative rate of return to children and positive population growth in a traditional society may imply (1) that the old age security motive for childbearing is, in fact, very strong; (2) that the rate of population growth is "too high" from a Paretian point of view; and (3) that each individual in current and all future generations could be made better off if the rate of population growth were lower and the level of old age consumption were increased, but that a reduction in population growth alone would reduce welfare. A social security tax and transfer policy could be devised to induce a Pareto optimal rate of population growth and distribution of life cycle consumption only if measures are taken to offset the divergence between the private and social rate of return to children created by the social security scheme.
Handle: RePEc:nbr:nberwo:0372
Template-Type: ReDIF-Paper 1.0
Title: Inflation Risk and Capital Market Equilibrium
Author-Name: Zvi Bodie
Author-Person: pbo569
Note: ME
Number: 0373
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0373
File-URL: http://www.nber.org/papers/w0373.pdf
File-Format: application/pdf
Publication-Status: published as Bodie, Zvi. "Inflation Risk and Capital Market Equilibrium," Financial Review, Vol. 17, No. 1 (May 1982), pp. 1-25.
Abstract: This paper investigates the effect of inflation uncertainty on the portfolio behavior of households and the equilibrium structure of capitol market rates. The principal findings regarding portfolio behavior are: (1.) In the presence of inflation uncertainty, households will have an inflation-hedging demand for assets other than riskless nominal bonds, which will be directly proportional to the covariance between the rate of inflation and the nominal rates of return on these other assets. (2.) An asset is a perfect inflation hedge if and only if its nominal return is perfectly correlated with the rate of inflation. The principal findings regarding capital market rates are: (1.) The equilibrium real yield spread between any risky security and riskless nominal bonds is directly proportional to the difference between the covariance of the security's nominal rate of return with the market portfolio and its covariance with the rate of inflation. (2.) As long as the net supply of monetary assets in the economy is greater than zero, an increase in inflation uncertainty will lower the risk premia on all real assets. (3.) A preliminary empirical test of the theory using rates of return on common stocks, long-term bonds, real estate and commodity futures contracts yields mixed results. The risk premia on long-term bonds and futures have the "wrong" signs.
Handle: RePEc:nbr:nberwo:0373
Template-Type: ReDIF-Paper 1.0
Title: Colonial and Revolutionary Muster Rolls: Some New Evidence on Nutrition and Migration in Early America
Author-Name: Kenneth L. Sokoloff
Author-Name: Georgia C. Villaflor
Note: DAE
Number: 0374
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0374
File-URL: http://www.nber.org/papers/w0374.pdf
File-Format: application/pdf
Publication-Status: published as Sololoff, K.L. and G.C. Villaflor, "Migration in Colonial America: Evidence from the Militia Muster Rolls," Social Science History, Vol. 6, (Fall 1982), pp. 539-570.
Abstract: That investment in human capital has made an important contribution to the increase of labor productivity and per capita income during the last several centuries is widely acknowledged. While much of the research on this issue has focused on education, many scholars have also directed attention to the significance of improvements in nutrition. Until recently, efforts to study this subject have been hampered by a lack of evidence, but it now appears possible to construct indexes of nutrition from height-by-age data. This paper employs a relatively underutilized type of historical document to investigate the level of nutrition in early America. The same material also provides a rich source of information about patterns of migration during this period. This paper finds that native-born Americans approached modern heights by the time of the Revolution. On average, colonial Americans appear to have been 2 to 4 inches taller than Europeans, with southerners considerably taller than northerners and the rural population of greater stature than the urban. These differences may indicate that other factors besides nutrition were important in accounting for the dramatic changes in U.S. mortality rates during the nineteenth century.
Handle: RePEc:nbr:nberwo:0374
Template-Type: ReDIF-Paper 1.0
Title: The Work and Wages of Single Women: 1870 to 1920
Author-Name: Claudia D. Goldin
Author-Person: pgo601
Note: DAE
Number: 0375
Creation-Date: 1979-07
Order-URL: http://www.nber.org/papers/w0375
File-URL: http://www.nber.org/papers/w0375.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia. "The Work and Wages of Single Women: 1870 to 1920." Journal of Economic History, Vol. XL, No. 1, (March 1980), pp. 81-89.
Abstract: Single women in the U.S. dominated the female labor force from 1870 to 1920. Data on the home life and working conditions of women in 1888 and 1907 enable the estimation of earnings functions. Work in the manufacturing sector for these women was task oriented and payment was frequently by the piece. Earnings rose steeply with experience and peaked early; learning was mainly on-the-job. Sex segregation of employment is seen as a partial product of the method of payment, and the early termination of human capital investment was a function of the life-cycle labor force participation of these women, although the role of the family is also critical.
Handle: RePEc:nbr:nberwo:0375
Template-Type: ReDIF-Paper 1.0
Title: Towards A Reconstruction of Keynesian Economics: Expectations and Constrained Equilibria
Author-Name: J. Peter Neary
Author-Person: pne11
Author-Name: Joseph E. Stiglitz
Note: PE
Number: 0376
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0376
File-URL: http://www.nber.org/papers/w0376.pdf
File-Format: application/pdf
Publication-Status: published as Neary, J. Peter and Joseph E. Stiglitz. "Towards A Reconstruction of Keynesian Economics: Expectations and Constrained Equilibria." Quarterly Journal of Economics, Vol. 98, Supplement, (1983), pp. 199-228.
Abstract: A two-period model of temporary equilibrium with rationing is presented, paying particular attention to agents' expectations of future constraints. it is shown that with arbitrary constraint expectations many different types of current equilibria may be consistent with the same set of (current and expected future) wages and prices, and that constraint expectations tend to be self-fulfilling (e.g., a higher expectation of Keynesian unemployment tomorrow increases the probability that it will prevail today). In addition, rational constraint expectations (i.e., perfect foresight of future constraint levels) are shown to enhance rather than reduce the effectiveness of government policy.
Handle: RePEc:nbr:nberwo:0376
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Portfolio Balance
Author-Name: John R. Martin
Author-Name: Paul R. Masson
Author-Person: pma135
Note: ITI IFM
Number: 0377
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0377
File-URL: http://www.nber.org/papers/w0377.pdf
File-Format: application/pdf
Abstract: An open economy portfolio balance model, describing allocation among money, a domestic bond, and a traded foreign currency bond is developed for a world of many countries. A special role is attributed to the dollar, namely that all internationally traded bonds are denominated in that currency. It is shown that in the short run with real variables exogenous and expectations static, stability requires that all countries except the U.S. be net creditors in dollar-denominated bonds. What data are available on inter-country claims suggest that some countries may well be net debtors abroad in foreign currency. In particular, if one excludes direct investment claims, private claims on the rest of the world by Japan and Canada have been negative over the period of floating rates since 1973. However, some preliminary reduced-form regression equations for the dollar exchange rates of these two countries do not support the implications of the portfolio balance model in the debtor case. On the other hand, an equation for a composite of Western European currencies (by our calculations, this group of countries is a net creditor) gives more promising results.
Handle: RePEc:nbr:nberwo:0377
Template-Type: ReDIF-Paper 1.0
Title: Labor Turnover and Youth Unemployment
Author-Name: Linda S. Leighton
Author-Name: Jacob Mincer
Note: LS
Number: 0378
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0378
File-URL: http://www.nber.org/papers/w0378.pdf
File-Format: application/pdf
Publication-Status: published as Leighton, Linda and Mincer, Jacob. "Labor Turnover and Youth Unemployment." The Youth Labor Market Problem: Its Nature, Causes and Consequences, edited by Richard B. Freeman and David A. Wise, pp. 235-275. Chicago: University of Chicago Press, 1982.
Publication-Status: published as Labor Turnover and Youth Unemployment, Linda Leighton, Jacob Mincer. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: The main question of concern in this paper is why youth unemployment is high relative to unemployment of adults. The analysis is based largely on longitudinal micro-data in the NLS and MID panels of men, surveyed in the 1966-1976 decade. Since the duration of unemployment increases with age, incidence that is the probability of experiencing unemployment is the main focus of our analysis. The basic finding is that the at first rapid and then decelerating decline with age in the probability of unemployment stems from a similarly shaped relation between the probability of separation (from a job) and working age. The age patterns are, in turn, mainly due to the decline of probabilities as tenure lengthens. Indeed, at given levels of tenure, unemployment incidence does not at all decline with age, except among blacks and in periods of high unemployment. We conclude that the short tenure level of the young is the main reason for the age differential in unemployment. To check this we compare youth with short-tenured groups which are not adversely selected, migrants who were not unemployed before migration and immigrants. The comparison reveals that youth are in the same situation as others with little accumulated tenure. We do note, however, that unemployment declines more slowly for youth than for others, reflecting the gradually increasing commitment to work in the transition from school to work and from parental to own household. Increases in the duration of unemployment with age are ascribed, within a search model framework, to a decline in the probability of finding job vacancies among older movers. The inference of increasing difficulty in job finding is also consistent with observed increases in the probability of unemployment conditional on separation, declines in the quit/layoff ration, and in wage gains from moves as workers age.
Handle: RePEc:nbr:nberwo:0378
Template-Type: ReDIF-Paper 1.0
Title: A Strategic Theory of Inflation
Author-Name: Mordecai Kurz
Author-Person: pku693
Number: 0379
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0379
File-URL: http://www.nber.org/papers/w0379.pdf
File-Format: application/pdf
Abstract: A strategic mechanism of price adjustment is introduced to explain inflations in the U.S. during 1909-1974. The mechanism follows from our theory that when the profit rate is above a normal-target rate, competitive forces operate to lower prices while if the profit rate is below the target a correlated strategy among firms operates to generate a rise in prices as a strategy to improve profitability. The notion of "correlated strategy" is adopted from game theory. The mechanism may operate in harmony or against demand and the net effect is what we call the "basic inflation." Contrary to a-priori notions of positive association between inflation rates and profit rates, our theory proposes a critical test of a negative association between these variables. Such a relationship is in fact empirically established. The analysis shows that large and persistent inflationary pressures are generated by low profitability and during 1971-1977 those accounted for some 20%-50% of total inflation. These pressures would be present even if no increase in cost occurs. This suggests that an important cause of the 1970's inflation is the low profit rate in the private sector and any public policy against inflation will fail if it does not aim at the same time to raise the profit rate on private capital.
Handle: RePEc:nbr:nberwo:0379
Template-Type: ReDIF-Paper 1.0
Title: The Canadian Dollar, 1971-76: An Exploratory Investigation of Short Run Movements
Author-Name: Charles Freedman
Note: ITI IFM
Number: 0380
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0380
File-URL: http://www.nber.org/papers/w0380.pdf
File-Format: application/pdf
Abstract: This paper examines the movement of the Canadian dollar over the 1971-76 period. Although Canadian prices increased substantially more than U.S. prices over this period, there was no tendency for a systematic depreciation of the Canadian dollar. To explain this phenomenon requires the introduction of other factors into the exchange rate equation. Among the variables that proved significant are the Canadian terms of trade, measures of long-term borrowing, the relative cyclical position of Canada and the United States, and the market's errors in forecasting the current account balance. When used together with relative prices, these variables track the movement of the Canadian dollar very satisfactorily over the period.
Handle: RePEc:nbr:nberwo:0380
Template-Type: ReDIF-Paper 1.0
Title: Inventories, Rational Expectations, and the Business Cycle
Author-Name: Alan S. Blinder
Author-Person: pbl41
Author-Name: Stanley Fischer
Note: EFG
Number: 0381
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0381
File-URL: http://www.nber.org/papers/w0381.pdf
File-Format: application/pdf
Publication-Status: published as Blinder, Alan S. and Fischer, Stanley. "Inventories, Rational Expectations,and the Business Cycle." Journal of Monetary Economics, Vol. 8, No. 3, (November 1981), pp. 277-304.
Abstract: The simplest macroeconomic models in which markets clear instantaneously, and expectations are rational preclude the existence of "business cycles," that is, of serially correlated deviations of output from trend. This paper studies one of several mechanisms that can be used to make these so-called "new-classical" models produce business cycles; the mechanism is the gradual adjustment of inventory stocks. Two microeconomic models of inventory holdings are formulated. Both imply, first, that current output should be a decreasing function of the stock of inventories and, second, that inventories, once perturbed from equilibrium levels, should adjust only gradually. These two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational. Two principal conclusions are reached. First, disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend. Second, if desired inventories are sensitive to the real interest rate, then even fully anticipated changes in money can affect real variables.
Handle: RePEc:nbr:nberwo:0381
Template-Type: ReDIF-Paper 1.0
Title: Supply vs. Demand Approaches to the Problem of Stagflation
Author-Name: Michael Bruno
Author-Name: Jeffrey Sachs
Note: ITI IFM
Number: 0382
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0382
File-URL: http://www.nber.org/papers/w0382.pdf
File-Format: application/pdf
Publication-Status: published as H. Giersch (ed.), Macroeconomic Policies for Growth and Stability,(Kiel: Institut fur Weltwirtschaft, 1981
Abstract: We develop a model of aggregate supply and demand in the open economy to explain the important characteristics of international macroeconomic adjustment in the 1970s. Traditional demand-oriented models cannot account for the worldwide phenomenon of rising inflation and unemployment in the mid-70s, or for the failure of most industrialized economies to recover from the deep recession of 1974-75. When aggregate supply is carefully treated, it is found that much of the inflation and sluggish output performance may be attributed to the jump in the real costs of intermediate inputs and the failure of real wages to adjust downward after the input price shock. A simulation model shows that fuel inputs are sufficiently important in production that a large part of the worldwide recession may be attributed to the change in the relative price of oil, since 1973. In an empirical section, it is suggested that countries differ in their response to supply shocks and macro-policies because of differences in key structural relationships, particularly in wage determination.
Handle: RePEc:nbr:nberwo:0382
Template-Type: ReDIF-Paper 1.0
Title: Inflation and the Benefits from Owner-Occupied Housing
Author-Name: Patric H. Hendershott
Author-Name: Sheng Cheng Hu
Note: PE
Number: 0383
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0383
File-URL: http://www.nber.org/papers/w0383.pdf
File-Format: application/pdf
Publication-Status: published as Hendershott, Patric H. and Hu, Sheng Cheng. "Inflation and Extraordinary Returns on Owner-Occupied Housing: Some Implications for Capital Allocation and Productivity Growth." Journal of Macroeconomics, Vol. 3, No. 2, (Spring 1981), pp. 177-203.
Abstract: This paper examines the effects of inflation on the allocation of resources between residential and nonresidential uses and the productivity of capital in the U.S. We begin by calculating the realized rates of return on homeowner equity and the contributions of fixed-rate mortgages and differences in relative inflation rates to extraordinary earned real returns. The paper then focuses on the implications of the extraordinary real returns on residential capital for stock prices and on the demand for owner-occupied housing. Proposals for achieving efficient allocation of capital between residential and nonresidential uses are also considered.
Handle: RePEc:nbr:nberwo:0383
Template-Type: ReDIF-Paper 1.0
Title: Time Series Changes in Youth Joblessness
Author-Name: Michael L. Wachter
Author-Name: Choongsoo Kim
Note: LS
Number: 0384
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0384
File-URL: http://www.nber.org/papers/w0384.pdf
File-Format: application/pdf
Publication-Status: published as Wachter, Michael L. and Kim, Choongsoo. "Time Series Changes in Youth Joblessness." The Youth Labor Market Problem: Its Nature, Causes and Consequences, edited by Richard B. Freeman and David A. Wise, pp. 155-198. Chicago: University of Chicago Press, 1982.
Publication-Status: published as Time Series Changes in Youth Joblessness, Michael L. Wachter, Choongsoo Kim. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: This study presents a time series analysis of the youth unemployment problem stressing the cohort overcrowding effect, a result of the baby-boom induced imbalance between younger and older workers. Several techniques are used to study the problem. First, reduced form unemployment equations are estimated for the disaggregated youth groups. The results indicate that secular swings in female and white youth unemployment rates do track well with the cohort imbalance hypothesis. However, relative increases in black male unemployment remain unexplained by this model. Second, alternative measures of youth unemployment are developed by treating school enrollment and military service as equivalent to employment. In addition, several employment-to-population ratio measures are explored. Third, equations for employment, unemployment, schooling and a residual category are estimated together. This allows one to analyze flows into and out of the four states with respect to changes in explanatory variables. The results suggest that youth unemployment rates, with the exception of the black male group, peaked in relative terms in the early l970s. A detailed analysis of the declining labor market position of blacks, however, uncovers puzzling results. Although black male unemployment rates are growing, and employment rates are declining, relative wages and school enrollment rates are increasing. In fact, at least half of the decline in black employment ratios can be associated with increasing school enrollment rates.
Handle: RePEc:nbr:nberwo:0384
Template-Type: ReDIF-Paper 1.0
Title: Labor Supply and Aggregate Fluctuations
Author-Name: Robert E. Hall
Note: EFG
Number: 0385
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0385
File-URL: http://www.nber.org/papers/w0385.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E. "Labor Supply and Agrregate Fluctuations." Carnegie-Rochester Conference Series on Public Policy, Supplementary to the Journal of Monetary Economics, Vol. 12, (1980), pp. 7-33.
Abstract: Issues of labor supply are at the heart of macroeconomic explanations of the large cyclical fluctuations of output observed in modern economies. This paper starts with a serious empirical examination of the view that the labor market is always in balance-that every observed combination of employment and compensation is a point of intersection of the relevant supply and demand curves. I will call this the "intertemporal substitution" model of fluctuations. According to this model, workers are willing to shift their hours of work from one year to another in response to modest shifts in relative wages. The paper goes on to point out a strong implication of the pure inter- temporal substitution model, namely, the irrelevance of changes in the money supply for the labor supply function. A model where markets clear instantly ought to obey full monetary neutrality. The data refute this implication absolutely unambiguously. The money stock unambiguously shifts the labor supply function. The pure substitution model seems untenable in the light of this evidence. The paper then turns to explanations of the nonneutrality of money in the short run. According to the most carefully worked out line of thought, monetary shocks cause workers to make inappropriate intertemporal shifts in labor supply, because they lack complete information about the source of aggregate shocks and are forced to respond in the same way to real and nominal disturbances. Finally, the paper turns to the view that, in the short run, labor supply is largely irrelevant to the determination of aggregate employment.
Handle: RePEc:nbr:nberwo:0385
Template-Type: ReDIF-Paper 1.0
Title: The Role of Prevailing Prices and Wages in the Efficient Organization of Markets
Author-Name: Robert E. Hall
Note: EFG
Number: 0386
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0386
File-URL: http://www.nber.org/papers/w0386.pdf
File-Format: application/pdf
Abstract: Among the ways a product or labor market might operate is the following: All firms quote the same price or wage. Customers or job-seekers search among sellers until they find one willing to sell them or employ them. They do not need to consider the possibility that another seller or employer might offer a better deal, since all offers are identical, under prevailing prices or wages, the small participants in the market -- customers and workers -- have very limited responsibilities for processing information. By contrast, where markets are equilibrated by conscious search for the best price or wage, the small participants face complex problems of gathering and interpreting information. Adherence to prevailing prices and wages may explain part of the macroeconomic puzzle of price and wage stickiness and the sensitivity of real variables to nominal disturbances.
Handle: RePEc:nbr:nberwo:0386
Template-Type: ReDIF-Paper 1.0
Title: The Estimation of Labor Supply Over Kinked Budget Constraints: Some New Econometric Methodology
Author-Name: Anthony J. Pellechio
Number: 0387
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0387
File-URL: http://www.nber.org/papers/w0387.pdf
File-Format: application/pdf
Abstract: Most programs of taxation and income maintenance imply that the tax rate faced by an individual changes at different levels of labor supply. As a result, the individual's budget constraint is kinked which presents problems for the empirical study of labor supply. This paper develops econometric methodology for estimating labor supply in the presence of taxes. Equations for market wage and shadow price are used to describe labor supply choices over a kinked budget constraint This approach makes a distinction between the discrete choice of which segment or corner of the kinked constraint to work on and the selection of the actual number of hours of work along linear segments. A consistent procedure is derived that uses all the tax rates faced by the individual and relies on no more structure than has been used in the previous literature on labor force participation. This procedure summarizes the individual's kinked budget constraint by calculating the expected value of variables that assume different values on the sections of the constraint. Techniques for estimating the model based on a probit analysis of the decision to work above or below certain corners of the budget constraint are presented. Maximum likelihood estimation is also discussed.
Handle: RePEc:nbr:nberwo:0387
Template-Type: ReDIF-Paper 1.0
Title: Notes on Optimal Wage Taxation and Uncertainty
Author-Name: Jonathan Eaton
Author-Person: pea5
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 0388
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0388
File-URL: http://www.nber.org/papers/w0388.pdf
File-Format: application/pdf
Publication-Status: published as Eaton, Jonathan and Rosen, Harvey S. "Labor Supply, Uncertainty, and Efficient Taxation." Journal of Public Economics, Vol. 14, No. 3, (December 1980) , pp. 365-374.
Abstract: Most contributions to optimal tax theory have assumed that all prices, including that of leisure, are known with certainty. The purpose of this paper is to analyze optimal taxation when workers have imperfect information about their wages at the time they choose their labor supplies. Both efficiency and redistributive aspects of the problem are considered. The paper begins with a discussion of the positive theory of wage taxation and labor supply under uncertainty. This is followed by a discussion of optimal taxation when individuals are identical, but their wages are stochastic. Finally, the case of simultaneous uncertainty and inequality is discussed. In this part of the paper it is assumed that the government's objective is to maximize a utilitarian social welfare function.
Handle: RePEc:nbr:nberwo:0388
Template-Type: ReDIF-Paper 1.0
Title: A Model of Trade and Exchange Rate Projections
Author-Name: Hannu Halttunen
Author-Name: Dennis Warner
Note: ITI IFM
Number: 0389
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0389
File-URL: http://www.nber.org/papers/w0389.pdf
File-Format: application/pdf
Abstract: This paper develops and applies a model of world trade and exchange rates to analyze dynamic interaction of the current account and exchange rate. The model is designed to concentrate on the determination of trade flows, prices and exchange rates for the OECD member countries but it also covers oil exporting countries, other developing countries and Centrally Planned Economies. The model contains exchange rate equations, based on the asset market approach, for major OECI) countries and adjustable pegging rules for small OECD countries and for non-oil LDOs. These provide the link from asset accumulation through the current account to the exchange rate. With the integration of exchange rate equations into the trade model, it can be used to analyze outcomes of different exchange rate regimes and alternative growth prospects in the OECD area. Simulation results indicate that the model produces a smooth and slow adjustment process for exchange rates and current accounts. They also show that with the higher growth target for an individual country large current account deficits may occur or large changes in real exchange rates are needed to reach the external equilibrium.
Handle: RePEc:nbr:nberwo:0389
Template-Type: ReDIF-Paper 1.0
Title: A Model of Trade and Exchange Rate Projections: Equations and Parameters
Author-Name: Hannu Halttunen
Author-Name: Dennis Warner
Note: ITI IFM
Number: 0390
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0390
File-URL: http://www.nber.org/papers/w0390.pdf
File-Format: application/pdf
Abstract: This paper contains a detailed description of a model of trade and exchange rates. A verbal summary of the model may be found in NBER Working Paper #389. The model contains equations for import demands, bilateral trade flows and trade prices for 26 regions and three commodities. A simple exchange rate model used developments in current accounts to model changes in nominal exchange rates. The regions covered are the twenty-three OECD countries and three non-OECD region: LDCs, OPEC, and the centrally planned economies (CPEs). Sector A contains an algebraic description of the model and a glossary of variables and parameters. Section B is a detailed discussion of the equations and the sources of the parameter values.
Handle: RePEc:nbr:nberwo:0390
Template-Type: ReDIF-Paper 1.0
Title: Cross Country Effects of Sterilization, Reserve Currencies and Foreign Exchange Information
Author-Name: Richard C. Marston
Note: ITI IFM
Number: 0391
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0391
File-URL: http://www.nber.org/papers/w0391.pdf
File-Format: application/pdf
Publication-Status: published as Marston, Richard C. "Cross Country Effects of Sterlilization, Reserve Currencies, and Foreign Exchange Intervention." Journal of International Economics, Vol. 10, No. 1, (February 1980), pp. 63-78.
Abstract: This study examines the international repercussions of national sterilization policies under fixed exchange rates and managed flexibility. The effects of sterilization on the country pursuing the policy are well-known, but the adverse effects on other countries have not been adequately explored. In this study, a stochastic framework is used to analyze the impact of balance of payments disturbances on key financial variables in the domestic and foreign countries. The effects of sterilization are explored under fixed rates, and the combined effects of foreign exchange intervention and sterilization are similarly investigated in a regime of managed flexibility. In either regime, sterilization by the foreign country imposes costs on the domestic country by magnifying the impact of balance of payments disturbances on the domestic financial market. The analysis has important implications for the use of reserve currencies: Countries issuing reserve currencies benefit from the automatic sterilization of their balance of payments surpluses or deficits, while countries using reserve currencies encounter the same cross country effects as with discretionary sterilization.
Handle: RePEc:nbr:nberwo:0391
Template-Type: ReDIF-Paper 1.0
Title: The Social Security Disability Program and Labor Force Participation
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Number: 0392
Creation-Date: 1979-08
Order-URL: http://www.nber.org/papers/w0392
File-URL: http://www.nber.org/papers/w0392.pdf
File-Format: application/pdf
Abstract: In the last twenty years the labor force participation rates of 45 to 54-year-old men have fallen 10.6 percentage points among non-whites and 4.4 percentage points among whites. I find that nearly half of this puzzling decline can be explained by the growth of the Social Security Disability program. By 1975, 6.22% of the prime-age non-white men and 3.57% of the white men were Social Security Disability beneficiaries. Despite the medical screening of applicants, I find in cross-section estimates an elasticity of .35 for beneficiary status with respect to benefit levels. As eligibility requirements have eased and as benefit levels have increased relative to earnings more men have dropped out of the labor force and become Social Security Disability beneficiaries.
Handle: RePEc:nbr:nberwo:0392
Template-Type: ReDIF-Paper 1.0
Title: Teenage Unemployment: What is the Problem?
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: David T. Ellwood
Note: LS
Number: 0393
Creation-Date: 1979-09
Order-URL: http://www.nber.org/papers/w0393
File-URL: http://www.nber.org/papers/w0393.pdf
File-Format: application/pdf
Publication-Status: published as Felstein, Martin and Ellwood, David. "Teenage Unemployment: What is the Problem?" The Youth Labor Market Problem: Its Nature, Causes and Consequences,edited by Richard Freeman and David Wise. Chicago: University of Chicago Press, (1982), pp. 17-33.
Publication-Status: published as Teenage Unemployment: What is the Problem?, Martin S. Feldstein, David T. Ellwood. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: This nontechnical paper was prepared as a background study for the NBER Conference on Youth Joblessness and Employment. Our analysis of data collected in the March 1976 and October 1976 Current Population Surveys leads us to the following conclusions: Unemployment is not a serious problem for the vast majority of teenage boys. Less than 5 percent of teenage boys are out of school, unemployed and looking for full-time work. Many out of school teenagers are neither working nor looking for work and most of these report no desire to work. Virtually all teenagers who are out of work live at hone. Among those who do seek work, unemployment spells tend to be quite short; over half end within one month when these boys find work or stop looking for work. Nevertheless, much of the total amount of unemployment is the result of quite long spells among a small portion of those who experience unemployment during the year. Although nonwhites have considerably higher unemployment rates than whites, the overwhelming majority of the teenage unemployed are white. Approximately half of the difference between the unemployment rates of whites and blacks can be accounted for by demographic and economic differences. There is a small group of teenagers with relatively little schooling for whom unemployment does seen to be a serious and persistent problem. This group suffers most of the teenage unemployment. Although their unemployment rate improves markedly as they move into their twenties, it remains very high relative to the unemp1oynent rate of better educated and more able young men.
Handle: RePEc:nbr:nberwo:0393
Template-Type: ReDIF-Paper 1.0
Title: Specific Information, General Information, and Employment Matches Under Uncertainty
Author-Name: W. Kip Viscusi
Author-Person: pvi69
Note: LS
Number: 0394
Creation-Date: 1979-09
Order-URL: http://www.nber.org/papers/w0394
File-URL: http://www.nber.org/papers/w0394.pdf
File-Format: application/pdf
Publication-Status: published as Viscusi, W. Kip. "Employment Relationships with Joint Employer and Worker Experimentation." International Economic Review, Vol. 24, No.2, (1983), pp . 313-322.
Abstract: Employment matches under uncertainty are typically accompanied by opportunities for information acquisition. Workers can acquire specific information about productivity lotteries at the firm or general information affecting their probabilistic beliefs about work elsewhere. Enterprises can acquire specific information concerning the productivity of a particular worker or general information about different groups of workers in a production process. In all cases, the market equilibrium with flexible wages is efficient. Moreover, there is no opportunity for strategic behavior that would alter this result. Both forms of information are associated with rising earnings profiles over time, hut the steepness is greater in the general case. The negative turnover-wage relation is attributable in part to the lower match termination rate of workers with productive lob histories, who earn higher wages than their less productive counterparts. General information is associated with more termination of employment matches by employers and employees than is specific information. The implications of specific/general information for matching processes in many respects aralle1 the role of that distinction in human capital theory, strengthening the link between matching theories and earlier human capital analyses.
Handle: RePEc:nbr:nberwo:0394
Template-Type: ReDIF-Paper 1.0
Title: Adjusting Depreciation in an Inflationary Economy: Indexing versus Acceleration
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 0395
Creation-Date: 1979-10
Order-URL: http://www.nber.org/papers/w0395
File-URL: http://www.nber.org/papers/w0395.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Adjusting Depreciation in an in an Inflationary Economy: Indexing versus Acceleration." National Tax Journal, Vol. 34 No. 1, (March 1981), pp. 29-43.
Abstract: With the existing "historic cost" method of depreciation, higher inflation rates reduce the real value of future depreciation deductions and therefore raise the real net cost of investment. The calculations in this paper show that this rise in the net cost can be quite substantial at recent inflation rates; e.g., the real net cost of an equipment investment with a 13 year tax life is raised 21 percent by an 8 percent expected inflation rate if the firm uses a 4 percent real discount rate. The effects of inflation on the net cost of investment can be completely eliminated by indexing depreciation. A more accelerated depreciation schedule can also lower the net cost of investment and make that net cost less sensitive to the rate of inflation. The current paper examines a particular acceleration proposal and finds that, for moderate rates of inflation and real discount rates, the acceleration proposal and full indexation are quite similar. For low rates of inflation, high discount rates, or very long-lived investments, the acceleration proposal causes greater reductions in net cost than would result from complete indexing. Conversely, for high rates of inflation, low discount rates, or very short-lived investments, the acceleration method fails to offset the adverse effects of inflation. Since the acceleration and indexation methods have quite similar effects under existing economic conditions, the choice between them requires balancing the administrative simplicity and other possible advantages of acceleration against the automatic protection that indexation offers against the risk of significant changes from the recent inflation rates and discount rates.
Handle: RePEc:nbr:nberwo:0395
Template-Type: ReDIF-Paper 1.0
Title: Family Effects in Youth Employment
Author-Name: Albert E. Rees
Author-Name: Wayne B. Gray
Author-Person: pgr111
Note: LS
Number: 0396
Creation-Date: 1979-10
Order-URL: http://www.nber.org/papers/w0396
File-URL: http://www.nber.org/papers/w0396.pdf
File-Format: application/pdf
Publication-Status: published as Rees, Albert E. and Gray, Wayne. "Family Effects in Youth Employment." The Youth Labor Market Problem: Its Nature, Causes and Consequences, edited by Richard B. Freeman and David A. Wise, pp. 453- 474. Chicago: Universityof Chicago Press, 1982.
Publication-Status: published as Family Effects in Youth Employment, Albert Rees, Wayne Gray. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: The authors begin with the hypothesis that parental contacts play a major role in finding jobs for youth. This hypothesis is tested with a model of youth employment that includes characteristics of other family members in addition to a large set of control variables. Particular attention is paid to parental characteristics that might indicate a parent's ability to assist the youth in finding a job, including occupation, industry and education. The effects of such variables are generally not significant and do not support the initial hypothesis. However, the employment probability of a youth is significantly affected by the presence of employed siblings, indicating the presence of some intrafamily effects.
Handle: RePEc:nbr:nberwo:0396
Template-Type: ReDIF-Paper 1.0
Title: The Duration of Youth Unemployment in West Germany: Some Theoretical Considerations
Author-Name: Wolfgang Franz
Note: LS
Number: 0397
Creation-Date: 1979-10
Order-URL: http://www.nber.org/papers/w0397
File-URL: http://www.nber.org/papers/w0397.pdf
File-Format: application/pdf
Abstract: This paper presents a theoretical model dealing with the duration of youth unemployment in West Germany. Duration can be expressed in terms of the underlying hazard function. After a brief discussion of a reasonable shape of the hazard function a distinction is made with respect to the probabilities of receiving a job offer and accepting it. Determinants of the latter decision are developed using a unified model of consumption, leisure, and job search. Uncertainty and some restrictions such as standard work time and entitlement to unemployment compensation are taken into account. The probability of receiving a job offer depends, among other factors, on the screening process undertaken by the firms .
Handle: RePEc:nbr:nberwo:0397
Template-Type: ReDIF-Paper 1.0
Title: Adolescent Health, Family Background, and Preventive Medical Care
Author-Name: Linda N. Edwards
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 0398
Creation-Date: 1979-10
Order-URL: http://www.nber.org/papers/w0398
File-URL: http://www.nber.org/papers/w0398.pdf
File-Format: application/pdf
Publication-Status: published as Edwards, Linda N. and Grossman, Michael. "Adolescent Health, Family Background, and Preventive Medical Care." Research in Human Capital and Development, Vol. III, edited by Ismail Siraseldin, David Salkever, and Alan Sorkin. Greenwich, CT: JAI Press, (1983), pp. 77-110.
Abstract: This paper investigates the health of white adolescents, focusing particularly on the roles of family background and preventive medical care. This emphasis is motivated in part by our desire to study adolescent health in the context of the nature-nurture controversy. The findings indicate first, that family characteristics (especially mother's schooling) do have a significant impact on adolescent health and second, that preventive care is an important vehicle for this impact in the case of dental health hut not in the ease of physical health measures. Similarly, the greater availability of dentists has a positive impact on dental health, but greater availability of pediatricians does not alter the physical health measures. On the basis of these results we predict that government efforts to improve the dental health of adolescents with policies to lower the cost of dental care or increase the availability of dentists are much more likely to be successful than similar policies directed at improving their physical health.
Handle: RePEc:nbr:nberwo:0398
Template-Type: ReDIF-Paper 1.0
Title: Teenage Unemployment: Permanent Scars or Temporary Blemishes?
Author-Name: David T. Ellwood
Note: LS
Number: 0399
Creation-Date: 1979-10
Order-URL: http://www.nber.org/papers/w0399
File-URL: http://www.nber.org/papers/w0399.pdf
File-Format: application/pdf
Publication-Status: published as Ellwood, David. "Teenage Unemployment: Permanent Scars or Temporary Blemishes?" The Youth Labor Market Problem: Its Nature, Causes and Consequences, edited by Richard B. Freeman and David A. Wise, pp. 349-390. Chicago: University of Chicago Press, 1982.
Publication-Status: published as Teenage Unemployment: Permanent Scars or Temporary Blemishes?, David T. Ellwood. in The Youth Labor Market Problem: Its Nature, Causes, and Consequences, Freeman and Wise. 1982
Abstract: This paper examines the persistence and long-term impacts of early labor force experiences. The paper reports a rise in employment rates for a cohort of young men as they age, but points out that those persons with poor employment records early have comparatively poor records later. In order to asses the extent to which differences in later employment and wages are causally related to these earlier employment experiences, the methodologies of Heckman, Chamberlain, and others are extended to account for Markov type persistence and a straight forward estimation technique results. In addition, a Sims type causality test is used to measure the true impact of work experience on wages. The paper concludes that the effects of a period without work do not end with that spell. A teenager who spends time out of work in one year will probably spend less time working in the next than he would have had he worked the entire year. Furthermore, the lost work experience will be reflected in considerably lower wages. At the same time, the data provide no evidence that early unemployment sets off a vicious cycle of recurrent unemployment. The reduced employment effects die off very quickly. What appears to persist are effects of lost work experience on wages.
Handle: RePEc:nbr:nberwo:0399
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Unionism on Worker Attachment to Firms
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS PR
Number: 0400
Creation-Date: 1979-10
Order-URL: http://www.nber.org/papers/w0400
File-URL: http://www.nber.org/papers/w0400.pdf
File-Format: application/pdf
Publication-Status: published as Freeman, Richard B. "The Effect of Unionism on Worker Attachment to Firms." Journal of Labor Research, Vol. 1, No. 1, (Spring 1980), pp. 29-61.
Abstract: This study examines these important questions using newly available data files on individuals, which contain information on their job tenure and union status, among other things. Section one examines the theoretical reasons for expecting unionism to increase job tenure. Section two develops the "waiting time" statistics and econometrics needed to analyze tenure and its converse, separations. Section three describes the data sets under study and presents the basic econometric analysis of the effect of unionism on tenure and separations. Section four analyzes the routes by which unionism influences the variables. The paper concludes with a brief discussion of the implications of the analysis for understanding the economic effects of unionism.
Handle: RePEc:nbr:nberwo:0400
Template-Type: ReDIF-Paper 1.0
Title: Rank-Order Tournaments as Optimum Labor Contracts
Author-Name: Edward P. Lazear
Author-Person: pla64
Author-Name: Sherwin Rosen
Note: LS
Number: 0401
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0401
File-URL: http://www.nber.org/papers/w0401.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, Edward P. and Rosen, Sherwin. "Rank-Order Tournaments as Optimum Labor Contracts." Journal of Political Economy, Vol. 89, No. 5, (October 1981), pp. 841-864.
Abstract: This paper analyzes compensation schemes which pay according to an individual's ordinal rank in an organization rather than his output level. When workers are risk neutral, it is shown that wages based upon rank induce the same efficient allocation of resources as an incentive reward scheme based on individual output levels. Under some circumstances, risk-averse workers actually prefer to be paid on the basis of rank. In addition, if workers are heterogeneous inability, low-quality workers attempt to contaminate high-quality firms, resulting in adverse selection. However, if ability is known in advance, a competitive handicapping structure exists which allows all workers to compete efficiently in the same organization.
Handle: RePEc:nbr:nberwo:0401
Template-Type: ReDIF-Paper 1.0
Title: Analysis of Pension Funding Under Erisa
Author-Name: Jeremy I. Bulow
Note: PE
Number: 0402
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0402
File-URL: http://www.nber.org/papers/w0402.pdf
File-Format: application/pdf
Publication-Status: published as Bulow, Jeremy. "WHat are Corporate Pension Liabilities?" Quarterly Journal of Economics, Vol. 97, No. 3, (August 1982), pp. 435-452, Contains only a subset of WP#402.
Abstract: This paper begins by describing the tax, funding, and insurance aspects of the Pension Reform Act of 1974. Next, the implications of those laws are analyzed from the standpoint of the funding decision of the firm. The tax advantage of early funding appears to be quite small. Because there are insurance and other reasons (related to asymmetries in the pension law) why firms might wish to underfund their plans, there is no good reason to expect all firms to fund to the limit. The final section discusses the magnitude of the firms' unfunded pension liability, properly defined. This debt is shown to be quite small. A major reason for this is the substantial increase in long- term nominal interest rates, which have decreased the present value of accrued benefits and, equally, unfunded pension obligations.
Handle: RePEc:nbr:nberwo:0402
Template-Type: ReDIF-Paper 1.0
Title: Inflation, Tax Rules, and the Stock Market
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 0403
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0403
File-URL: http://www.nber.org/papers/w0403.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Inflation, Tax Rules and the Stock Market." Journal of Monetary Economics, Vol. 6, No. 3, (July 1980), pp. 309-331.
Publication-Status: published as Inflation, Tax Rules, and the Stock Market, Martin Feldstein. in Inflation, Tax Rules, and Capital Formation, Feldstein. 1983
Abstract: This paper shows how the interaction of tax rules and expected inflation can decrease substantially the share price per dollar of pretax earnings. The current analysis extends my earlier study [Feldstein (1978)] by recognizing corporate debt, retained earnings, and the role of diverse shareholder investments. As before, the analysis separates household and institutional investors.
Handle: RePEc:nbr:nberwo:0403
Template-Type: ReDIF-Paper 1.0
Title: The Investment Tax Credit: An Evaluation
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Lawrence H. Summers
Author-Person: psu137
Note: PE
Number: 0404
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0404
File-URL: http://www.nber.org/papers/w0404.pdf
File-Format: application/pdf
Abstract: Since1954, the United States government has made numerous adjustments in the tax treatment of corporate income with the aim of influencing the level and composition of fixed business investment. The effects of these reforms, principally changes in the investment tax credit, are evaluated using a macro-econometric model. We find little evidence that the investment tax credit is an effective fiscal policy tool. Changes in the credit have tended to destabilize the economy, and have yielded much less stimulus per dollar of revenue loss than has previously been assumed. The crowding out of "non-favored" investment has been sufficient to offset a large percentage of the increase in the stock of equipment resulting from the use of the credit. We are led to conclude that the reliance on the investment tax credit and other investment tax incentives should be reduced. If a credit is to be maintained, it is of the utmost importance that its effect on all sectors of the economy be considered. We analyze several possible neutrality criteria, but conclude that no simple rule can guide the optimal structuring of incentives.
Handle: RePEc:nbr:nberwo:0404
Template-Type: ReDIF-Paper 1.0
Title: Inequality Within and Between Families
Author-Name: Eytan Sheshinski
Author-Person: psh109
Author-Name: Yoram Weiss
Note: CH
Number: 0405
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0405
File-URL: http://www.nber.org/papers/w0405.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 90, no. 1 (1982): 105-127.
Abstract: Between-family differences in expenditures and output reflect the effect of simultaneous increases in children's ability on the willingness of parents to transfer resources to them. Within-family differences also reflect the attitudes of parents toward disparity among children. In this paper we characterize the conditions on parents' preferences that determine whether between-family differences exceed within-family differences. For an additive utility, within-family differences in expenditures always exceed between-family differences. This may also be true for the maximum utility function if an increase in ability reduces the marginal utility of income. Within-family differences in output (utility or income) can also exceed between-family differences. In this case, the implication for income distribution is that equality is enhanced by a higher correlation of ability between brothers.
Handle: RePEc:nbr:nberwo:0405
Template-Type: ReDIF-Paper 1.0
Title: International Adjustment with Wage Rigidity
Author-Name: William H. Branson
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: ITI IFM
Number: 0406
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0406
File-URL: http://www.nber.org/papers/w0406.pdf
File-Format: application/pdf
Publication-Status: published as Branson, William and Rotemberg, Julio J. "International Adjustment with Wage Rigidity." European Economic Review, Vol. XIII, No. 3, (May 1980), pp. 30 9-341.
Publication-Status: published as International Adjustment with Wage Rigidity, William H. Branson, Julio J. Rotemberg. in International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, de Ménil and Gordon. 1991
Abstract: Two of the puzzling macroeconomic phenomena of the 1970s have been the persistent stagnation in Europe, and the disagreement between the U.S. and Europe on the feasibility of recovery by demand expansion. This paper develops the hypothesis that the source of both the stagnation and the policy differences is money-wage stickiness in the U.S. and real-wage stickiness in Europe and Japan. A real wage which is sticky above its equilibrium level in Europe and Japan would account for stagnation and infeasibility of recovery by demand expansion. The theoretical models are developed in both the one-commodity and two-commodity-bundle cases. The empirical results confirm that in the U.S. the nominal wage adjusts slowly toward equilibrium, while in Germany, Italy, Japan, and the U.K. the real wage adjusts slowly.
Handle: RePEc:nbr:nberwo:0406
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Adjustment and the Demand for International Reserves
Author-Name: John F. O. Bilson
Author-Name: Jacob A. Frenkel
Note: ITI IFM
Number: 0407
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0407
File-URL: http://www.nber.org/papers/w0407.pdf
File-Format: application/pdf
Publication-Status: published as Bilson, John F. O. and Jacob A. Frenkel. "International Reserves: Adjustment Dynamics," Economics Letters, 1979, v4(3), 267-270.
Abstract: Although there have been a large number of empirical studies of the demand for international reserves, there have not been many successful demonstrations that deviations of the actual stock of reserves from the target level defined by the demand function trigger a process of adjustment. This paper presents new evidence which suggests that central banks do have a target level of international reserve holdings, and that the adjustment of actual reserves towards the target level is quite rapid. In addition, an economic theory of the speed of adjustment is presented and tested. The evidence suggests that central banks adjust more rapidly to reserve deficiencies than to surpluses, that the speed of adjustment is positively related to the divergence between the actual level of reserves and the target level, and that countries which hold abnormally large quantities of reserves do so, in part, in order to adjust more slowly. Finally, the paper examines the applicability of the model to the current regime of managed flexible exchange rates. The evidence suggests that the move towards greater exchange rate flexibility has not significantly altered the reserve holding behavior of the world's central banks.
Handle: RePEc:nbr:nberwo:0407
Template-Type: ReDIF-Paper 1.0
Title: Energy Efficiency, User Cost Changes, and the Measurement of Durable Goods Prices
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: PR
Number: 0408
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0408
File-URL: http://www.nber.org/papers/w0408.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. "Energy Efficiency, User Cost Change, and the Measurementof Durable Goods Prices." The U.S. National Income and Product Accounts: Selected Topics, edited by Murrary F. Foss, pp. 107-140. Chicago: Universityof Chicago Press, (1982).
Publication-Status: published as Energy Efficiency, User-Cost Change, and the Measurement of Durable Goods Prices, Robert J. Gordon. in The U.S. National Income and Product Accounts: Selected Topics, Foss. 1982
Abstract: This paper develops the theory of price measurement when quality change is "nonproportional", yielding increases in the user value of a given product in a different proportion than the increase in production cost associated with the quality improvement. The theoretical section demonstrates that "nonproportional" quality change is treated consistently by properly defined input and output price indexes; that both types of indexes should he based on quality adjustments that use the criterion of user value rather than production cost; and that if improvements in energy efficiency are embodied in a good by its manufacturer, the prices of new models should be adjusted for the user value of these cost savings. The proposed approach is applied in a case study of the commercial aircraft industry. In contrast to the official price index for aircraft that rises at a 2.5 percent annual rate between 1957 and 1972,a new index is developed that declines at a 7.1 percent annual rate over the same period. The new index implies that output and productivity in the aircraft industry grew much faster than previously believed between 1957 and1972,while total factor productivity in the airline industry grew much less rapidly. The proposed quality adjustments for individual aircraft types are corroborated by price ratios observed in the used aircraft market.
Handle: RePEc:nbr:nberwo:0408
Template-Type: ReDIF-Paper 1.0
Title: Taxation and the Stock Market Valuation of Capital Gains and Dividends: Theory and Empirical Results (Rev)
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: David F. Bradford
Note: PE
Number: 0409
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0409
File-URL: http://www.nber.org/papers/w0409.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Roger H. and Bradford, David F. "Taxation and the Stock Market Valuation of Capital Gains and Dividends: Theory and Empirical Results." Journal of Public Economics, Vol. 14, No. 2, (October 1980), pp. 109-1 36.
Abstract: Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect. In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholders pay a heavier tax on dividends. We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment.
Handle: RePEc:nbr:nberwo:0409
Template-Type: ReDIF-Paper 1.0
Title: On Forecasting Interest Rates: An Efficient Markets Perspective
Author-Name: James E. Pesando
Author-Person: ppe278
Note: ME
Number: 0410
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0410
File-URL: http://www.nber.org/papers/w0410.pdf
File-Format: application/pdf
Publication-Status: published as Pesando, James E. "On Forecasting Interest Rates: An Efficient Markets Perspective." Journal of Monetary Economics, Vol. 8, No. 3, (November 1981), pp . 305-318.
Abstract: This paper reviews, from an applied forecasting perspective, the properties of short- and long-term interest rates in an efficient market. The paper emphasizes that efficient markets do not preclude economic agents from successfully forecasting movements in short-term interest rates. For brief forecast intervals, however, ex ante changes in long-term rates are sufficiently close to zero that economic agents are not likely to improve upon the no-change prediction of the martingale model. Economic agents, in effect, are not likely to succeed in forecasting short-term movements in long-term interest rates. An analysis of three sets of Canadian interest rate forecasts provides results which are consistent with the theoretical discussion, Further, these results parallel those obtained in recent studies of recorded forecasts in the United States, although the authors of these latter studies apparently failed to appreciate the nature of their findings.
Handle: RePEc:nbr:nberwo:0410
Template-Type: ReDIF-Paper 1.0
Title: What is Labor Supply and Do Taxes Affect It?
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 0411
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0411
File-URL: http://www.nber.org/papers/w0411.pdf
File-Format: application/pdf
Publication-Status: published as Rosen, Harvey S. "What is Labor Supply and Do Taxes Affect It?" The American Economic Review, Vol. 70, No. 2, (May 1980), pp. 171-176.
Abstract: The issue of tax-induced changes in labor supply behavior has been receiving increasing attention. Economic theory alone can say little about the impact of income taxation on labor supply because of the well- known conflict between income and substitution effects. Therefore, an enormous amount of effort has been devoted to empirical investigation of this problem, with a focus on the impact of taxes on hours of work and labor force participation rates. In Section I of this paper, I briefly discuss this literature and its major conclusions. It has been long understood, however, that the concept "labor supply" is more general than "hours of work." If one individual is healthier, better educated, and more highly motivated than another, then presumably a given number of hours of work will lead to a greater effective labor supply for the former than for the latter. Thus, studies of the effect of taxes on other dimensions of labor supply are needed in order to assess the full impact of taxes on work incentives. The main purpose of this paper is to discuss some of this research (Section II) and to explore its policy implications (Section III).
Handle: RePEc:nbr:nberwo:0411
Template-Type: ReDIF-Paper 1.0
Title: The Roles of Monetary, Financial and Fiscal Policy with Rational Expectations
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: ITI IFM
Number: 0412
Creation-Date: 1979-11
Order-URL: http://www.nber.org/papers/w0412
File-URL: http://www.nber.org/papers/w0412.pdf
File-Format: application/pdf
Publication-Status: published as "Crowding Out of Private Capital Formation by Government Borrowing in the P Resence of INtergenerational Gifts and Requests" Economic REview, vol. 2,no.2, pp. 111-142, August 1980. Also Reprinted in Macroeconomic Theory and Stabilization Policy, by Buiter, University of MI Press, pp. 255-282,Ann A
Publication-Status: published as "Monetary, Financial, and Fiscal Policies Under Rational Expectations" International Monetary Fund Staff Papers, Vol. 27, No. 4, pp. 785-813,(December 1980). (see also, reprint 206)
Abstract: The setup of the paper is as follows: Section I presents a fairly standard, small deterministic macromodel with a number of classical features. All markets clear instantaneously, there is no money illusion, and perfect foresight rules. The effects of monetary, financial, and fiscal policies in this model are analyzed. A number of nonneutrality propositions are stated. The drawback of this model is that it is ad hoc in the sense that private behavioral relationships have not been derived from explicit optimizing behavior. Section II, therefore, summarizes the results of some studies on debt neutrality and monetary superneutrality in a "fully rational" overlapping generations model. This leads to the conclusion that the ad hoc model of Section I is not a bad parable for such fully rational models. Section III abandons the assumption of universal instantaneous Wairasian equilibrium and considers the consequences of price and wage stickiness for the scope for stabilization policy; stochastic models are analyzed here, which also permits the consideration of some of the interesting issues associated with incomplete information.
Handle: RePEc:nbr:nberwo:0412
Template-Type: ReDIF-Paper 1.0
Title: Why Do Companies Pay Dividends?
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Jerry Green
Author-Person: pgr476
Note: PE
Number: 0413
Creation-Date: 1979-12
Order-URL: http://www.nber.org/papers/w0413
File-URL: http://www.nber.org/papers/w0413.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin and Green, Jerry. "Why Do Companies Pay Dividends?" The American Economic Review, Vol. 73, No. 1 (March 1983), pp. 17-30.
Abstract: This paper presents a simple model of market equilibrium to explain why firms that maximize the value of their shares pay dividends even though the funds could instead be retained and subsequently distributed to shareholders in a way that would allow them to be taxed more favorably as capital gains. The two principal ingredients of our explanation are:(1) the conflicting preferences of shareholders in different tax brackets and (2) the shareholders' desire for portfolio diversification, we show that companies will pay a positive fraction of earnings in dividends. We also provide some comparative static analysis of dividend behavior with respect to tax parameters and to the conditions determining the riskiness of the securities.
Handle: RePEc:nbr:nberwo:0413
Template-Type: ReDIF-Paper 1.0
Title: A Multicountry Econometric Model (Revised)
Author-Name: Ray C. Fair
Author-Person: pfa24
Note: EFG ITI IFM
Number: 0414
Creation-Date: 1979-12
Order-URL: http://www.nber.org/papers/w0414
File-URL: http://www.nber.org/papers/w0414.pdf
File-Format: application/pdf
Publication-Status: published as Fair, Ray C. Part of: "Specification, Estimation, and Analysis of Macroeconometric Models." Harvard University Press, (1984).
Abstract: A multi-country econometric model is presented in this paper. The theoretical basis of the model is discussed in Fair (l979a), and the present paper is an empirical extension of this work. The model is quarterly and contains estimated equations for 44 countries. Most of the equations have been estimated by two stage least squares. The basic estimation period is 19581-19801 (89 observations). For equations that are relevant only when exchange rates are flexible, the basic estimation period is 1972II-19801 (32 observations). The trade matrix contains data for 64 countries. The U.S. part of the model is the model described in Fair (1976, 1980b). The model differs from previous models in a number of ways.(1) Linkages among countries with respect to exchange rates, interest rates, and prices appear to be more important in the model than they are in previous models. (2) There is no natural distinction in the model between stock-market and flow-market determination of the exchange rate.(3) The number of countries is larger than usual, and the data are all quarterly. (4) I alone have estimated small models for each country and then linked them together, rather than, as Project LINK has done, take models developed by others and link them together. The advantage of this approach is that the person constructing the individual models knows from the beginning that they are to be linked together, and this may lead to better specification of the linkages. The paper contains (1) a review of the theoretical basis of the model, (2) a description of the econometric model, including presentation and discussion of all the estimated equations, (3) a comparison of the predictive accuracy of the model to that of a fourth order autoregressive model, and (4) a brief discussion of the properties of the model. A much more detailed examination of the properties of the model is presented in Fair (1981).
Handle: RePEc:nbr:nberwo:0414
Template-Type: ReDIF-Paper 1.0
Title: The Impact of the Market and the Family on Youth Employment and Labor Supply
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: LS
Number: 0415
Creation-Date: 1979-12
Order-URL: http://www.nber.org/papers/w0415
File-URL: http://www.nber.org/papers/w0415.pdf
File-Format: application/pdf
Publication-Status: published as Gustman, Alan L. and Steinmeier, Thomas L. "The Impact of Wages and Unemployment on Youth Enrollment and Labor Supply." The Review of Economics and Statistics, Vol. LXIII, No. 4, (November 1981), pp. 553- 560.
Abstract: This paper analyzes the school enrollment and labor supply decisions of teenagers and young adults as jointly deter-mined outcomes. The empirical results are based on an application of discrete multivariate analysis to a sample taken from the Survey of Income and Education. Higher relative wage offers are found to reduce the probability of a youth enrolling in school and to increase labor supply. However, the estimated impacts are very sensitive to adjustments made for the possibility that wage rate offers by firms are higher for full-time than for part-timework. Job availability, as measured by the local youth unemployment rate, has its strongest effect on the probability of enrollment and full-time labor force participation for nonwhite males, accounting, in the extreme, for a difference in this probability of almost 50 percent. Since a wage measure is included as an independent variable, we can be sure that the job availability measure is not acting as a surrogate for an absent wage variable, but instead has an impact of its own. Specific findings on the influence of various family and market characteristics are compared to those from earlier studies.
Handle: RePEc:nbr:nberwo:0415
Template-Type: ReDIF-Paper 1.0
Title: An Economic Analysis of the Diet, Growth, and Health of Young Children in the United States
Author-Name: Dov Chernichovsky
Author-Name: Douglas Coate
Note: EH
Number: 0416
Creation-Date: 1979-12
Order-URL: http://www.nber.org/papers/w0416
File-URL: http://www.nber.org/papers/w0416.pdf
File-Format: application/pdf
Publication-Status: published as Chernichovsky, Dov and Douglas Coate. "The Choice Of Diet For Young Children And Its Relation To Children's Growth," Journal of Human Resources, 1980, v15(2,Spring), 255-263.
Abstract: The purpose of this paper is to investigate the extent to which family income and education are obstacles to the provision of adequate diets for young children in the United States. An examination of the Health and Nutrition Examination Survey reveals the following: 1. Average nutrient intakes of young children are well above recommended dietary standards, with the exception of iron. 2. Average nutrient intakes for children in households of lower economic status are very similar to intakes of children in households of higher economic status. Rates of children's growth are also similar in these households. 3. Family income and education of the household head have statistically significant but very small positive effects on the nutrient intake levels of young children. 4. There are substantial effects of protein intakes on children's height and head growth, even though protein is consumed in excess of dietary standards. This finding and the apparent correlation between children's growth and their intellectual development brings to question the adequacy of present protein standards. Could American mothers, who provide very high protein diets for their children in households at all levels of socioeconomic status know more about what constitutes an adequate diet for their children than the experts do?
Handle: RePEc:nbr:nberwo:0416
Template-Type: ReDIF-Paper 1.0
Title: Preventive Care, Care for Children and National Health Insurance
Author-Name: Gilbert R. Ghez
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 0417
Creation-Date: 1979-12
Order-URL: http://www.nber.org/papers/w0417
File-URL: http://www.nber.org/papers/w0417.pdf
File-Format: application/pdf
Publication-Status: published as Ghez, Gilbert R. and Grossman, Michael. "Preventive Care, Care for Childrenand National Health Insurance." National Health Insurance: What Now, What Later, What Never?, edited by Mark V. Pauly, pp. 137-180. Washington, D.C.: American Enterprise Institute, 1980.
Abstract: The purpose of this paper is to examine issues related to the coverage of preventive care under national health insurance. Four specific kinds of medical care services are included under the rubric of preventive care: prenatal care; pediatric care, dental care, and preventive physicians' services for adults. We consider whether preventive care should be covered under national health insurance, and if so what is the nature of the optimal plan. Our review of the literature on the effects of medical care on health outcomes suggests that prenatal care and dental care are effective, but pediatric care (except for immunizations) and preventive doctor care for adults are not. Moreover, health outcomes in which care is effective correspond to outcomes in which income-differences in health are observed. These empirical results and the theory of health as the source of consumption externalities indicate that the optimal NHI plan should be characterized by benefits that fall as income rises. In addition, the plan should be selective rather than general with respect to the types of services covered.
Handle: RePEc:nbr:nberwo:0417
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy and the 1979 Supply Shock
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 0418
Creation-Date: 1979-12
Order-URL: http://www.nber.org/papers/w0418
File-URL: http://www.nber.org/papers/w0418.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Robert J. "Supply Shocks And Monetary Policy Revisited," American Economic Review, 1984, v74(2), 38-43.
Abstract: The most striking aspects of recent U.S. wage and price behavior are the small year-to-year variations in the rate of change of wages, the modest 1977-79 acceleration in the rate of change of both wages and the consumption deflator net of food and energy, and an unprecedented gap between the inflation rates recorded by the CPI and personal consumption deflator. A small and simple econometric model is used to forecast the consequences of various policies for the future growth of the monetary base. No policy will be able to prevent an acceleration in the growth rate of the personal consumption deflator net of food and energy from its recent 7 percent track to 8 percent or above in the first half of 1980. The gross personal consumption deflator will climb even faster, with the difference depending on the behavior of oil and food prices. Thereafter, the effect of slack labor markets will begin to allow inflation net of food and energy to decelerate substantially. A 6 percent rule for the monetary base is too conservative and causes the unemployment rate to rise to 8.5 percent in 1982. An 8 percent rule for the base is preferable, allows the unemployment rate to begin to fall after late 1981, and still achieves a deceleration of inflation net of food and energy from 8 percent in mid-1980 to 6 percent in 1983. Thereafter, the growth of the base should be slowed down to keep the economy from overshooting again.
Handle: RePEc:nbr:nberwo:0418