Knowledge that Transforms

The neutrality of changes in the monetary base and reserve requirements is examined assuming the existence of two forms of money and an arbitrary number of other financial assets. Necessary and sufficient conditions for a policy to be neutral are developed. Several forms of institutional structure for the banking system are examined to see whether these structures satisfy the derived necessary conditions. It is shown that reserve requirement changes are neutral under very restrictive conditions. Moreover, even the neutrality of monetary base changes requires that money maintenance cost functions be homogeneous of degree zero in nominal money and prices.

The aim of the paper is to explain the earnings structure in manufacturing industries in Japan mainly by differences in resources used to create and improve the skills and knowledge of the working force. The approach provides the opportunity of analyzing the effects on earnings of experience inside and outside of the firm, given educational level attained, and to inquire whether the behavior of the Japanese worker corresponds to returns to these different forms of experience. The results suggest that outside experience is quite important, and that it is substitutable, to a great extent, for inside experience. These results do raise questions about the true extent of the nenkô wage system. A by-product of the paper is a calculation of the rate of return to a college education in Japan.

This note was inspired by a 1970 JPE paper by Robin Barlow, who claimed that if the ratio of income elasticity to price elasticity of a public good exceeded the elasticity of tax rate with respect to income, then too little public goods would be supplied under majority voting. This note shows that Barlow's claim is not true in general, but also shows that with some fairly plausible additional assumptions it is true.