Knowledge that Transforms

As its central feature, a bimetallic standard grants nominal debtors an option to deliver either of two metals. With results from the option pricing literature, construction of a formula to evaluate the bimetallic option in debt instruments is straightforward. With this formula, one can compute the option value in a wide range of nineteenth-century U.S. Treasury securities. Posession of the option values permits an adjustment of the yields on U.S. securities to make them comparable to yields on nonmetallic European securities. Evaluating the option allows the estimation of transfers from debtors to creditors.

This paper analyses data on union and employer rankings of different panels of arbitrators in an actual arbitration system. A random utility model of bargainer preferences is developed and estimated. The estimates indicate that unions and employers have similar preferences, in favor of lawyers, more experienced arbitrators, and arbitrators who seem to have previously favored their side. Alternative rankings models, which are estimated to test whether bargainers rank arbitrators strategically, reveal no evidence of strategic behavior.

To assess the validity of Thomas Sargent's claim that hyperinflation can be terminated without dire employment effects, monthly unemploymentpercentage estimates were constructed for Poland, Hungary, and Austriaover the period both before and after monetary stabilization followingWorld War I. These data reveal that there were significant effects onemployment in the three territories. Unemployment peaked in Poland at alittle less than 13 percent; in Hungary at 12 percent and probably higher; and in Austria at 7 percent. An attempt is made to identify those considerations that contributed to the emergence of unemploymentwith the advent of monetary stabilization.

This paper analyzes the effects of income differentials in fertility on Lorenz curves and standard inequality measures. The role of intergenerational mobility is examined and incorporated into counterfactual simulations based on Brazilian data. Two standard inequality measures move in opposite directions in both the steady state and the transition in response to the elimination of fertility differentials. The counterfactuals confirm the theoretical predictions of misleading intertemporal inequality comparisons in the presence of differential fertility.

The exchange of comments between William Shepherd and Michael Smirlock, Thomas Gilligan, and William Marshall (this Review, December 1986) raised two key points that remain unresolved. The first point is whether Tobin's q ratio, a firm's financial market value divided by replacement cost of its assets, is a better measure of firm performance than accounting rates of return. The second point of contention is whether superior performance, however measured, can be attributed to efficiency rather than market power. This paper offers further clarification on both of these points. In Section I the performance measure choice is shown to be influenced by fundamental differences between finance and economics. In Section II, the structure-performance model employed by Smirlock, Gilligan, and Marshall (hereafter, SGM) and Shepherd is shown to be a special case of a more general model allowing for a dependence of the market-share-performance relationship on the concentration ratio. The same data from the original study by SGM (1984) are used in Section III to provide a comparison of SGM's findings with empirical results from an alternative specification of the structure-performance model. This comparison suggests that attributing superior firm performance exclusively to efficiency is not well founded. Concluding remarks are found in Section IV.