Knowledge that Transforms

William A. Niskanen, Steve H. Hanke, Land Prices Substantially Underestimate the Value of Environmental Quality: A Rejoinder, The Review of Economics and Statistics, Vol. 62, No. 1 (Feb., 1980), p. 156

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 longrun 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.

T HERE is increasing evidence that advertising plays an especially prominent role in structural change.' Mueller and Hamm (1974) found that between 1947 and 1970 concentration was increasing the most in industries characterized by a high degree of product differentiation. In reworking the Mueller-Hamm study because he felt that their model suffered from regression bias, Wright (1978) substantiated the Mueller-Hamm conclusions. Ornstein and Lustgarten (1978) found changes in industry advertising-to-sales ratios to be a significant positive variable in a model that explains changing industry concentration, although they are quite cautious in interpreting their findings. Here we add to previous work by reporting the major results from an analysis of changes in industry concentration based on a sample of 167 four-digit Standard Industrial Classification (SIC) industries for which comparable data were available for the period 1947 to 1972.2 Starting with a slightly modified Mueller-Hamm model we extend the analysis by replacing the dummy variable classification scheme for the degree of product differentiation developed by Parker (1967) with a continuous measure of advertising intensity.3 We then differentiate between television and other types of media advertising.

A probabilistic discovery model modified after Kaufman's earlier model is simplified to reduce computational demands and to reduce the sensitivity of the resulting estimates. The model is applied to the North Sea to estimate remaining oil reserves and forecast future discoveries. The simplification jeopardizes some informational detail, but the errors and approximations inherent in historical data sometimes overvalue the available information. A broader categorization scheme helps to control errors in this case. The model uses a stochastic production function based on a timing relationship between exploratory efforts and reservoir discovery and on a dynamic relationship of productivity and resource depletion. 21 references, 4 tables. (DCK)

Ernst R. Berndt, Thomas H. McCurdy, David E. Rose; On Testing Theories of Financial Intermediary Portfolio Selection, The Review of Economic Studies, Volum

Christopher J. Heady, Pradeep K. Mitra; The Computation of Optimum Linear Taxation, The Review of Economic Studies, Volume 47, Issue 3, 1 April 1980, Pages

In "The Inefficiency of Interest-bearing National Debt" (J.P.E. [April 1979]), we argued that private sector transaction costs are needed in order to explain interest on government debt. It follows that if the government's transaction costs do not depend on its portfolio, then, barring special circumstances, an open-market purchase is deflationary and welfare improving. In this paper we show that this result can survive a potentially relevant special circumstances: reserve requirements which limit the size of insured intermediaries.

This paper examines empirically the relationship between innovative activity, as measured by the rate of return to research-and-development expenditures, and firm size using a sample of firms from the chemicals and allied products industry (SIC 28). We find that size is a prerequisite for successful innovative activity. The estimated rate of return to research and development for the smaller firms is 30 percent, while for the larger size firms it is 78 percent. Statistical tests for structural stability were used to divide the sample into these two behavioral regimes.

Although estimates of the fertility-labor supply relationship abound, a full appreciation of the interpretation of such estimates has been lacking, regardless of the empirical strategy employed. This paper attempts to elucidate, within the context of a life-cycle decision-making process, the information contained in the estimated association between fertility and labor supply as calculated from "single" and "simultaneous-equations" estimation techniques. We also present a statistical methodology based upon the occurrence of twins in the first pregnancy and provide estimates, using that methodology, of the extent to which women's life-cycle labor supply decisions respond to exogenous (and, in this case, unanticipated) extra children.