Knowledge that Transforms

A current trend among oil-producing nations with private oil sectors is to move toward tax systems that are based upon pr ofits rather than production. The authors present a case study of wha t can go wrong with profit-based tax schemes. They study the implemen tation of the net profit share leasing system in the United States in the early 1980s. They conclude that the information requirements of the scheme are heavy, perhaps prohibitive, and that the net profit sh are system can easily backfire if the informational requirements can not be met. The authors also show that the U.S. government misused th e limited amount of information that was available to it. Copyright 1988 by MIT Press.

In order to determine the importance of parental time inputs in the intergenerational transmission of socioeconomic status, previous work relies on proxies such as family size, birth order, maternal employment, and retrospective reports of child care time. This paper is unique in finding a connection between more direct measures of mother's child-care time and children's outcomes as adults. It shows that (1) higher home productivity increases, but higher opportunity costs reduce, maternal child-care time and (2) greater child-care time of highly-educated, but not of less well-educated, mothers significantly raises children's years of schooling. Copyright 1988 by MIT Press.

Peter C. Y. Chow, Mitchell Kellman, Anti-LDC Bias in the U.S. Tariff Structure: A Test of Source Versus Product Characteristics, The Review of Economics and Statistics, Vol. 70, No. 4 (Nov., 1988), pp. 648-653

Robert W. Staiger, Alan V. Deardorff, Robert M. Stern, The Effects of Protection on the Factor Content of Japanese and American Foreign Trade, The Review of Economics and Statistics, Vol. 70, No. 3 (Aug., 1988), pp. 475-483

This paper demonstrates how the circumstances of quitting a previous job affect the probability of a later voluntary job change. The theoretical section describes a model of expected-utility-maximizing job search and mobility. Although the inability to observe utilities associated with specific jobs precludes a direct test of the utility maximizing mobility hypothesis, a testable implication is derived in the context of a simple job search model. Utility maximization implies that workers who rely exclusively on employed search to find a new job are less likely to quit again. This theoretical implication is confirmed by the parameter estimates. Copyright 1988 by MIT Press.

Michael T. Belongia, R. W. Hafer, Richard G. Sheehan, On the Temporal Stability of the Interest Rate-Weekly Money Relationship, The Review of Economics and Statistics, Vol. 70, No. 3 (Aug., 1988), pp. 516-520

The authors derive a model of money demand for an optimizing consumer with rational expectations in a discrete time infinte hortizon framework under uncertainty. Mone y demand responds to unanticipated changes in income, one period expe ctations of future bond and money interest rates, unanticipated curre nt interest rates, and past anticipations of current rates. The deriv ed consumption function mirrors money demand behavior. Joint estimati on of the consumption and money demand equations by weighted nonlinea r least squares corroborates the predicted effects, particularly inco me neutrality. This money demand model substantially outperforms a co nventional specification in post-sample simulation over 1975-85. Copyright 1988 by MIT Press.