Knowledge that Transforms

James M. Poterba, Lawrence H. Summers, Unemployment Benefits and Labor Market Transitions: A Multinomial Logit Model with Errors in Classification, The Review of Economics and Statistics, Vol. 77, No. 2 (May, 1995), pp. 207-216

The effect of schooling on the odds that smokers quit smoking is estimated. Particular attention is given to the possible importance of unobservables in measuring the schooling effect. It is shown that schooling has a relatively substantial positive effect on the odds that men and women ages twenty-five and older quit smoking.

Entry and exit literature focuses almost exclusively on firm-level decisions, leaving out an important aspect of firm behavior: whether to introduce new models while the firm produces similar goods and where to locate them in the existing product space, taking into account own models and the possibility of new entry. This paper analyzes model entry and exit decisions in the case of the personal computer market. Differences in new model spatial location between incumbents and entrants are found, while both model overpricing and firm reputation are found to be significant in the probability of model's exit estimation.

Over the last twenty years, many studies have been made of the elasticity of substitution between capital and labor. The reported estimates are highly variable, and reveal an apparent dichotomy between cross-sectional and time-series studies. The former suggest that capital and energy are substitutes while the latter suggest the converse. All these studies reported Allen partial elasticities of substitution. We suggest that the Morishima elasticity may be a more useful measure for the issues of concern to capital energy substitution. We calculate the Morishima elasticities from parameters estimated in a selection of earlier studies and find no excessive variability, nor any evidence of the time-series/cross-section dichotomy. Capital and energy are Morishima substitutes.

We examine evidence on omitted-ability bias in estimates of the economic return to schooling, using proxies for unobserved ability. We consider measurement error in these ability proxies and the potential endogeneity of both experience and schooling, and examine wages at labor market entry and later. Including ability proxies reduces the estimate of the return to schooling, and instrumenting for these proxies reduces the estimated return still further. Instrumenting for schooling leads to considerably higher estimates of the return to schooling, although only for wages at labor market entry. This estimated return generally reverts to being near (although still above) the OLS estimate if we allow experience to be endogenous. In contrast, for observations at least a few years after labor market entry, the evidence indicates that OLS estimates of the return to schooling that ignore omitted ability are, if anything, biased upward rather than downward.

Jene K. Kwon, Hoon Paik, Factor Price Distortions, Resource Allocation, and Growth: A Computable General Equilibrium Analysis, The Review of Economics and Statistics, Vol. 77, No. 4 (Nov., 1995), pp. 664-676

Seung-Rok Park, Jene K. Kwon, Rapid Economic Growth with Increasing Returns to Scale and Little or no Productivity Growth, The Review of Economics and Statistics, Vol. 77, No. 2 (May, 1995), pp. 332-351

Theoretical and empirical studies do not address whether campaign contributions from more than one election cycle are important for congressional voting behavior. Further, they do not address whether campaign contributions from different periods have different effects on legislative voting behavior. This paper analyzes the cumulative effect of campaign contributions over two time periods. Moreover, this paper studies the importance of the timing of contributions for legislative voting behavior. Ten roll call votes on price supports and quotas for various farm commodities in 1981 and 1985 are analyzed. Most of the estimated contribution coefficients are statistically significant. The results show that without campaign contributions farm interest would have lost in five of the seven votes that were won. Moreover, contributions that were given at approximately the same time as the vote have a larger impact on voting behavior than contributions that the legislator received one or two years prior to the vote.

This paper is an empirical study of the value of four file compatibility standards for transferring data in the personal computer software market. The results are that only the LOTUS file compatibility standard is significant in explaining price variations and it is significant in both the spreadsheet and database management system markets. This supports the hypothesis that the personal computer software market exhibits complementary network externalities.

This paper uses micro-level historical data to examine the causes of bank failure.For statecharactered Kansas banks during 19 10-28, time-to-failure is explicitly modeled using a proportional hazards framework.In addition to standard financial ratios, this study includes membership in the voluntary state deposit insurance system and measures of technical efficiency to explain bank failure.The results indicate that deposit insurance system membership increased theprobability of failure and banks which were technically inefficient were more likely to fail than technically efficient banks.