Knowledge that Transforms

The Winner's Curse and Public Information in Common Value Auctions: Reply by Colin M. Campbell, John H. Kagel and Dan Levin. Published in volume 89, issue 1, pages 325-334 of American Economic Review, March 1999

This paper presents a brief overview of fertility trends in post-transitional societies. Average fertility in the developed world reached a post-World War II maximum at 2.8 births per woman (bpw) during the peak of the baby boom in the late 1950s. Steep declines in the 1960s and 1970s left fertility below replacement reaching just 1.7 bpw during 1990-95. Below replacement fertility is now the norm in the developed world as well as in a small but growing number of populations elsewhere particularly Asian countries. This paper uses the total fertility rate (TFR) which is the most widely used indicator of period fertility to measure levels and trends in the fertility of populations. However ongoing changes in the timing of childbearing affect the fertility level measured in a given year or period. Examining parents childbearing intentions would be useful since TFR and other period measures of fertility may give misleading information. The findings state the reasons why current low fertility is unlikely to decline much further and may even rise in the future in a number of countries. The first reason is that the TFR is a hypothetical measure that can and often does give an inaccurate indication of the actual rate of childbearing of women. This rate is not as slow as implied by the TFR in many developed countries. A second reason for expecting fertility not to decline further is that couples in most post-transitional societies plan to have about two children.

Some recent empirical evidence suggests that stock prices are not properly modelled as the present discounted value of expected dividends and that empirical models incorporating nonlinear bubble components better fit the data. In this paper we show that the nonlinearity in the relationship between prices and dividends may arise from how managers choose dividend payout. In particular, we propose a model of managed dividends which can explain observed long-term trends in stock prices. This model of managed dividends is shown to be observationally equivalent to the popular intrinsic bubbles model.(This abstract was borrowed from another version of this item.)

In their annual review of academic salaries, the American Association of University Professors observes large gender-related salary differentials. At doctoral-level institutions, male professors at the rank of full professor earn 11.4% more than women full professors. Data on academic labor markets from the Survey of Doctorate Recipients to evaluate gender differences in salaries and promotion probabilities. Differences in employment outcomes by gender are found using two methods: the Oaxaca decomposition is used to examine salary differentials, and duration analysis is used to estimate promotion to tenure. While gender salary differences can largely be explained by academic rank, substantial gender differences in promotion to tenure exist after controlling for productivity, demographic characteristics, and primary work activity.

This article begins with the hypothesis that large economic fluctuations--the marked changes in the unemployment rate that characterize market economies--are a consequence of problems of adjustment to disturbances, especially adjustments of wages and prices. The article argues that because different prices (including prices of labor and capital) are determined in different ways, shocks lead to marked changes in relative prices, and those disturbances in relative prices greatly exacerbate economic fluctuations. The author looks closely at the price-setting process, providing further insights into why prices exhibit rigidities and why different prices may adjust at different rates. He then explores the consequences of asymmetric price responses.

Can we know how good future economic growth can be if we do not know how good it has been? Apparent changes in the structure of the economy, notably, the rise of information technology, skill-extensive technical change, and a potential reversion to nonmarket production, will serve to increase the effort needed to maintain our already tenuous grasp on measuring income, wages, and well-being. Piecing together available measures, the United States appears to have been experiencing substantial economic growth as measured by both per-family income and wealth. The well-known dispersion of income by education is evident, with earnings of those with less than high-school education on the decline, but rising for those with college education or more. For families in the Panel Study of Income Dynamics (PSID) headed by a male aged 25–64, mean family income rose by 11.5 percent, from $58,585 (1997 CPI-U dollars) for 1983 to $65,292 for 1993. If one factors in a 1-percent per annum correction factor to the CPI (Matthew D. Shapiro and David W. Wilcox, 1997; Michael J. Boskin et al., 1998), average real family income grew on the order of 22 percent in 10 years. Rising family income is not explained simply by more workers per family, since the civilian labor-force participation rate rose only 1.5 percentage points, from 65.3 percent in 1986 to 66.8 percent in 1996. Nor does the rise in income appear to be the result of more market hours per week. If anything, hours per worker may have declined, overall. Average weekly hours in the private sector are reported to have changed only trivially, declining from

Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border by Gordon H. Hanson and Antonio Spilimbergo. Published in volume 89, issue 5, pages 1337-1357 of American Economic Review, December 1999

Labor productivity

Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts: Comment by Roel M. W. J. Beetsma and Henrik Jensen. Published in volume 89, issue 1, pages 342-347 of American Economic Review, March 1999

Our thesis is that poor countries are poor because they employ arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently. In this paper, we analyze the consequences of one such arrangement. In each industry, the arrangement enables a coalition of factor suppliers to be the monopoly seller of its input services to all firms using a particular production process. We find that eliminating this monopoly arrangement could well increase output by roughly a factor of 3 without any increase in inputs.