Knowledge that Transforms

Three to 5 years after job displacements, workers receiving the advance notice mandated by current law earn approximately 10% more than their nonnotified counterparts. This differential is not the result of firms systematically notifying persons with favorable reemployment prospects-early warnings are disproportionately obtained by individuals expected to earn relatively low wages in subsequent employment. It is not clear, however, whether prenotification has a causal effect. The notification differential may occur because the advance notice is frequently provided by employers offering other kinds of adjustment assistance such as job counseling, skill retraining, supplemental unemployment benefits, or outplacement assistance.

World War II veterans earn more than nonveterans in their cohort. We test whether the World War II veteran premium reflects nonrandom selection into the military of men with higher earnings potential. The estimation is based on the fact that from 1942 to 1947 priority for conscription was determined by date of birth. Information on individuals' dates of birth may therefore be used to construct instrumental variables for veteran status. Empirical results from the 1960, 1970, and 1980 censuses, along with two other microdata sets, support a conclusion that World War II veterans earn no more than comparable nonveterans and may well earn less.

We use the Current Population Survey to describe what we believe are the most salient aspects of labor force behavior of older men and women during the last 2 decades. First, we show that early retirement has increased dramatically, and this trend continued through the 1980s. Second, we show that the factors that most sharply distinguish propensities toward early retirement are those usually associated with low wages. Third, we show that trends in reduced participation for older men parallel those for younger men, while a pattern of increasing female participation is to be expected given the behavior of younger cohorts.

Jaime Marquez, The Econometrics of Elasticities or the Elasticity of Econometrics: An Empirical Analysis of the Behavior of U.S. Imports, The Review of Economics and Statistics, Vol. 76, No. 3 (Aug., 1994), pp. 471-481

Stephen G. Cecchetti, Georgios Karras, Sources of Output Fluctuations During the Interwar Period: Further Evidence on the Causes of the Great Depression, The Review of Economics and Statistics, Vol. 76, No. 1 (Feb., 1994), pp. 80-102

A controversial aspect of the management buyouts that were popular throughout the 1980s is the potential for a conflict of interest to arise when a manager bids to acquire the firm he manages. This study examines 184 management buyouts and reports three findings. First, returns to prebuyout shareholders are greater when managers must bid against outside acquirers. Second, bid revisions in the face of competition exceed revisions due to shareholder litigation and negotiations with boards. Third, the incidence of competition is negatively related to the prebuyout share holdings of managers. Coauthors are Ronald F. Singer, Anju Seth, and Darla F. Lang. Copyright 1994 by MIT Press.

Yannis M. Ioannides, Stuart S. Rosenthal, Estimating the Consumption and Investment Demands for Housing and Their Effect on Housing Tenure Status, The Review of Economics and Statistics, Vol. 76, No. 1 (Feb., 1994), pp. 127-141

This paper uses 1979-85 data on women from the National Longitudinal Survey of Youth to examine the eco-nomic, sociological, and institutional antecedents of adolescent childbearing and high school completion and to analyze the effect of early childbearing on school completion. Fertility and school completion are modeled as dichotomous outcomes, and their determinants are estimated using a bivariate probit specification. The paper finds evidence that adolescent childbearing is an endogenous determinant of high school completion and that failing to account for this endogeneity leads to an over-estimate of the schooling consequences of early childbearing.

This paper studies trade liberation between a lag country and a small one. We make two key assumptions, suggested by political debates on trade reform in small countries. First, future production requires an irreversible investment now. Second, There is a the possibility of future trade negotiations. Strikingly, anticipated trade negotiations mau make the small country strictly worse off than a fully anticipated trade war, and indeed worse off than autarchy. The reason is a negative strategic externality in the small country conferred by anyone investing in country into trade with the large one, harming its bargaining trade, so that anticipated bargeing benefits the small country on balance only if (i) the two economies are sufficiently different, and (ii) there are sufficient substitutions possibilities in consumption.

The literature on patent protection assumes a so called "fencepost" system, in which there would be no need to refer to the courts over questions of interpretation. In reality, we observe a myriad of patent infringement suit through which questions of utility, novelty, and nonobviousness are independently ruled on by a court. Therefore, patent litigation accompanying initial imitations can reveal important information about the validity of the contested patents for other potential entrants. This paper explores the implications of such information revelation through patent litigation. It is shown that the payoffs for the patentee and the initial imitator are highly discontinuous in the degree of patent protection. Furthermore, strengthening intellectual property rights is not necessarily desirable for the patentee. The analysis also has implications for interpreting empirical data on imitations lags.