Knowledge that Transforms

This paper constructs a general equilibrium model of North-South tradein which the North continually introduces new goods. The rate at whichtechnology diffuses to the South is a function of differences in the cost of production in the two regions. The key result of the model is that labor force growth in the South initially increases real wages inthe North (a standard result in classical trade models), but in the long run reduces Northern wages by accelerating the transfer of technology and drawing capital out of the North as well.

A dynastic cycle is a periodic alternation of society between despotism and anarchy. In a society of farmers, rulers, and bandits, population growth simultaneously impoverishes farmers and reduces the ruler's surplus per head. Society evolves into a despotic stationary state or into a dynastic cycle dependent on whether poverty among farmers chokes off population growth before the surplus shrinks to the point where rulers turn to banditry.

The U.S. dollar price of the U.K. pound sterling is tested for a speculative bubble, defined as a period with a nonzero median in excessreturns. A nonparametric procedure is developed, which controls for data mining over the period of flexible exchange rates, and finds a negative bubble in the excess return to holding sterling rather than dollar assets during the period 1981-84. Possible interpretations arebootstrap equilibria (rational bubbles), nonsym-metric fundamentals, and nonrational expectations.

Although the nature of the differences between parties in democratic electoral politics is an enduring question in political science, surprisingly little is understood about the subject. But substantial progress has been made in recent years, most notably in understanding party differences in macroeconomic policies and outcomes. The first breakthrough was Douglas Hibbs's (1977) analysis of party-related differences in the unemployment rate. In his time-series analysis for the United States, Hibbs modeled the path of unemployment as an autoregressive-moving average process subject to a dummy variable intervention term indicating party of the president. His analysis indicated that Democratic administrations were associated with lower unemployment than Republicans by 2.36 points after eight years in office, and even larger differences in long-run equilibrium. A subsequent article by Nathaniel Beck (1982) addressed the same issue, and found the party differences less sharp when administration-specific policy differences are considered. The techniques employed by Hibbs and Beck focus directly on an outcome (unemployment), rather than on the policy instruments that are presumably responsible for altering outcomes. This approach can be misleading when there are long lags between implementation of policies and ultimate effects, or when shocks occasionally intrude upon the regular connections between instruments and outcomes. Macroeconomic theories can provide information about constraints linking macroeconomic variables, but Hibbs and Beck fail to incorporate theoretical constraints. Such constraints could help determine what kinds of outcomes are feasible and sustainable, and to what extent outcomes are induced by policies as opposed to shocks. Our purpose here is to consider how one might go about estimating party differences in a framework that takes advantage of some insights offered by macroeconomic theories, and to report some preliminary results. (A more complete description of the analysis is provided in our working paper, available upon request.)

A common view of golden parachutes and shark repellents is that they are designed by management to insulate itself from the discipline imposed by the market for corporate control and so are harmful to shareholders. This paper offers an alternative view that these devicesare beneficial to shareholders because they allow better contracting between manager and shareholders. Evidence on the incidence of goldenparachutes and on the compensation-tenure relationship for managers of golden parachute firms supports the alternative view.

The equilibrium of capital and equilibrium market prices are derived for a world economy with a unified securities market, mobile capital, no uncertainty, and varying tax rates on different sources of income in each country. The paper then characterizes optimal tax rates for a small country in this setting, focusing on the peculiar incentives created when the before-tax rate of return differs among securities due to differences in their typical tax treatment.

The notion that the price of substitutes serves as a determinant of lively arts demand is hardly new. It dates back decades at least to the seminal work by William Baumol and William Bowen (1966, p. 244), who contended that movies substitute for live performances. Susan Touchstone (1980, p. 36), examining lively arts demand in the United States, followed the lead of Baumol and Bowen by defining substitute price in terms of movie admission, while Glenn Withers (1980, p. 739), also for the United States, cast it in terms of reading or recreation. I (1984, p. 462) considered both types of measures in connection with a study of the demand for Shakespeare in Great Britain. But surely if movies or reading or recreation are substitutes for the lively arts, then so are those arts themselves. Should Richard II become dearer, an individual might elect to attend La Boheme or Fidelio or Swan Lake rather than to sit through Superman II. The lively arts are not homogeneous. Each has its own set of characteristics, and consequently substitutes lie within the arts spectrum. Apart from fleeting acknowledgment by, say, Alan Peacock (1981, p. 3), this point has been ignored by demand analyses to date. It is not ignored here.

This paper develops and tests an optimizing model determining the distribution of family planning and health subsidies across heterogeneous households and assesses the biases in cross-area estimates of the health effects of such subsidies due to public resource optimization. The model incorporates both health externalities and the endogenous response of the size of the recipient population to program subsidies. Longitudinal data describing child health and publicly provided family planning and health programs in 20 barrios in Laguna Province in the Philippines are used to estimate the effects of such programs on child health and the relationships between the distribution of the programs and preprogram health levels. The impact of a program on a particular childs health status is viewed as dependent upon the childs length of exposure to the program. A basic feature of the model is the presence of health externalities which is shown to be sufficient along with plausible features of household behavior to make selective subsidization of fertility control (either alone or in combination with health investment subsidies) Pareto efficient. The model suggests that subsidization of fertility control is likely to be Pareto efficient in the presence of health or human capital externalities when human capital and family size are gross substitutes and/or when any per child human capital subsidies may substitute for direct subsidies to health investment and an equalizing distribution of the subsidies (the highest family planning subsidies to the lowest health recipient households) is efficient. When both health and family planning subsidies are used fertility control subsidies minimize the subsidy burden for donors and are highest when total subsidy expenditures per child are greatest.

Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at