Knowledge that Transforms

This article studies the role of the family in determining the skill composition and labor market experiences of immigrants in the United States. Our theoretical framework, based on the assumption that family migration decisions maximize household income, shows that the family attenuates the selection characterizing the skills of the immigrant population. The empirical analysis uses the 1970 and 1980 Public Use Samples of the U.S. census and reveals that an immigrant's skills and labor market performance are greatly influenced by the composition of the household at the time of migration and by his placement in the immigration chain.

We provide theoretical and empirical analyses of an asymmetric-information model of layoffs. When firms have discretion with respect to whom to lay off, the market infers that laid-off workers are of low ability. Assuming that no such negative inference is warranted if workers are displaced in a plant closing, postdisplacement wages should be lower and postdisplacement unemployment spells should be longer for those displaced by layoffs than for those displaced by plant closings, but predisplacement wages should not differ by cause of displacement. Evidence on displaced workers from Current Population Surveys supports all three of our model's predictions.

The authors extend the Q theory of investment to allow for adjustment costs for labor, under the additional assumption that the firm is a monopolistic competitor in the output market. The issue of nonconstant returns to scale is also discussed. The authors show that the standard Q model is a special case of a more general model involving testable parameter restrictions. Estimates for the U.S. manufacturing sector suggest that the departure from the assumption of perfect competition and lack of adjustment costs for labor receive empirical support in the data. Copyright 1991 by MIT Press.

This paper analyzes the effects of demand shifts within and between local labor markets on unemployment and employment levels and changes observed in those markets.

V. Kerry Smith, Raymond B. Palmquist, Paul Jakus, Combining Farrell Frontier and Hedonic Travel Cost Models for Valuing Estuarine Quality, The Review of Economics and Statistics, Vol. 73, No. 4 (Nov., 1991), pp. 694-699

Previous research examining the nonemployment of displaced workers suffers from methodological flaws which reinforce widely held but substantially incorrect views about the pattern of postseparation joblessness. In particular, adjustment difficulties have been overstated for nonwhites, long tenure workers, and those terminated during periods of high unemployment and underestimated for persons in manufacturing industries or white collar occupations.

Numerous studies have estimated hedonic price functions for durable goods. In this paper we apply the methodology to breakfast cereals, a nondurable good. We employ maximum likelihood to estimate the hedonic price functions using data from three large supermarkets. The price function depends on characteristics that provide tastes, nutrition and convenience to consumers, and the estimates yield insights into pricing policies, consumer preferences and consumer use of information.

Surveys of individual's risk-dollar trade-offs illuminate not only the local trade-off rates, but also can be used to address more fundamental questions about the structure of utility functions. This largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk-dollar trade-offs for minor health effects. The empirical tests indicate that for all but one of the temporary health effects considered, consumers treat injuries as tantamount to a drop in income, implying that the health impact does not alter the structure of the utility function in a fundamental way. Copyright 1991 by MIT Press.

This study estimates translog variable cost functions for 147 American doctorate granting universities, accounting for three major products of these institutions: undergraduate and graduate instruction, and research. Explicit measures of research output and quality are employed. Evidence is found for considerable economies of scale for the average institution, as well as economies of scope related to the joint production of undergraduate and graduate instruction. The public or private ownership of an institution is not significant for the explanation of variable costs. The intensity of state regulation in the public sector does not have a significant impact on production efficiency. Copyright 1991 by MIT Press.

Numerous articles have investigated the distribution of share prices, and find that the returns are fat tailed. Nevertheless, there is still controversy about the amount of probability mass in the tails, and hence about the most appropriate distribution to use in modeling returns. This controversy has proven hard to resolve, as the alternatives are non-nested. We employ extreme value theory, focusing exclusively on the larger observations in order to assess the tail shape within a unified framework. We find that at least the first two moments exist. This enables one to generate robust probabilities on large returns, which put the recent stock market swings into historical perspective.