Knowledge that Transforms

The goal of any allocation mechanism is to improve the initial situation given by the endowments of the agents. For classical convex economies with price systems, the competitive process looks to be the best such mechanism. Indeed, from the New-Welfare Theorems of Arrow, Debreu, and Koopmans, we know that it achieves Pareto-efficient allocations. It is also well-known that the competitive mechanism is individually rational, i.e., the competitive equilibrium makes the position of each individual at least as good as his initial endowment (see, for instance, the nice book of Hildenbrand and Kirman [1976], where it is shown that the competitive equilibria belong to the core of the economy). Furthermore, the competitive mechanism is uniquely informationally efficient

Tim S. Campbell, Yuk-Shee Chan; Optimal Financial Contracting with ex post and ex ante Observability Problems*, The Quarterly Journal of Economics, Volume

Journal Article Sequential Vertical Integration Get access Herman C. Quirmbach Herman C. Quirmbach Iowa State University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 107, Issue 3, August 1992, Pages 1101–1111, https://doi.org/10.2307/2118377 Published: 01 August 1992

Paul Burkett, Robert C. Vogel; Financial Assets, Inflation Hedges, and Capital Utilization in Developing Countries: An Extension of McKinnon's Complementar

David M. Garman, Daniel J. Richards; Wage-Price Flexibility, Market Power, and the Cyclical Behavior of Real Wages, 1959–1980*, The Quarterly Journal of Ec

This paper shows a widening in black-white earnings and employment gaps among young men from the mid-1970s through the 1980s. Earnings gaps increased most among college graduates and in the Midwest, while gaps in employment-population rates grew most among dropouts. We attribute the differential widening to shifts in demand for subgroups due to shifting industry and regional employment, the falling real minimum wage and deunionization, the growing supply of black to white workers that was marked among college graduates, and to increased crime among dropouts. The different factors affecting subgroups highlight the economic diversity of black Americans.

Recent theory casts doubt on the frequently used interindustry regression method of inferring a country's abundant factors. This paper examines the empirical importance of these theoretical qualifications by comparing regression-derived estimates of factor abundance with both revealed and actual factor abundances for 35 countries and 12 resources. We demonstrate the theoretical importance of trade imbalances for the reliability of the regression estimates and therefore propose and implement a theoretically consistent trade imbalance correction. The results indicate that, despite valid theoretical concerns, the regression estimates are generally reliable indicators of revealed factor abundance. Therefore, the innumerable regression studies conducted over the past 30 years can be considered to provide reliable evidence concerning the validity of the factor abundance theory.

Christopher J. Waller, David D. VanHoose; Discretionary Monetary Policy and Socially Efficient Wage Indexation*, The Quarterly Journal of Economics, Volume 107,

Introduction Get access Lawrence F. Katz Lawrence F. Katz Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 107, Issue 1, February 1992, Page i, https://doi.org/10.2307/2118321 Published: 01 February 1992

An economy consisting of identical perfectly competitive firms with real liquidity costs and a one-period production lag has a locally unstable stationary equilibrium with complex eigenvalues for a wide range of parameters. Monetary policy aimed at stabilizing real balances can support nonstationary equilibrium paths that converge to a limit cycle, which has Keynesian features. The First Welfare Theorem does not hold because the price level appears in the production function through liquidity costs, so that production has a positive externality.