Knowledge that Transforms

Retail gasoline prices in 22 cities were surveyed to identify the effects of competition on price during the 1964-1971 period, when gasoline supplies were relatively normal and price wars were common. The informational theory of oligarchy is used to derive regression results and determine their market relevance. The 1965 price restoration move led by Texaco effectively eliminated small marketers selling at supra-competitive levels. The findings support the conclusion that collusive pricing was practiced to some extent during the period until competitive pricing returned in 1970. 8 references.

JN a recent article Hall (1972) examined the relationship between wage and unemployment rates in twelve cities. He observed a positive relationship between the two: high hourly wages were paid in high unemployment rate cities, low hourly wages were paid in low unemployment rate cities. Moreover, this relationship, he argued, was a characteristic of equilibrium of the aggregate economy. The empirical results obtained by Hall were based on twelve observations for the year 1966. Since his model was designed to study the characteristics of equilibrium, the question may justifiably be raised as to whether the year 1966 represented an equilibrium state of the economy; might it not be possible that what Hall observed was a characteristic of disequilibrium instead of equilibrium? This is a particularly important issue, for Tobin (1972, p. 10) has tended to regard the aggregate economy to be in a state of perpetual disequilibrium. Furthermore, as Robert A. Gordon has pointed out, since Hall's results were obtained on the basis of only twelve observations, could not his results be reversed if some of the cities were excluded from his study?' Hall's conclusions were based on the results of the least squares regression of the wage rate on the unemployment rate, an appropriate procedure if the direction of causality runs from the latter to the former. Yet his theoretical analysis (correctly) implied that the two variables were jointly determined, an issue to which we will return in section II. But if the unemployment and wage rates are jointly determined then orthogonal regression should be used in order to determine, the quantitative relationship between them. The aim of this work is to re-examine and extend Hall's empirical results so as to determine the extent to which they are affected by his estimation technique, his selection of the cities and the year 1966. Although the necessary data for a direct, straightforward extension of Hall's work are not available, data do exist that permit us to look into these issues.

An important function of government in the construction and the maintenance of public infrastructure or social overhead capital...

PERSONAL saving rates, i.e., the ratios of personal saving to personal disposable income, in many industrialized countries have risen dramatically in recent years. A number of attempts to explain the phenomenon of rising saving rates coinciding with price inflation have drawn upon the work of George Katona (1975), who has stressed the feeling of uncertainty and pessimism about the future caused by inflation that, in turn, encourages saving. In this paper a general model of aggregate household saving behavior is formulated. Data on Canada, Germany, Japan, the United Kingdom, and the United States are used to estimate the personal saving function in each of the countries and the results are used to test various hypotheses about personal saving behavior. This paper has two major objectives: to test for a direct influence of inflation on personal saving after taking into account the influence of other relevant factors, including any indirect channels by which inflation may exert an influence (e.g., the level of real liquid assets); and to determine what factors in each country are important for explaining saving behavior.

THE hypothesis that firms with market power pay higher wages than competitive industries has implications that are important to many areas of policy. If firms with market power do pay higher wages, the excessive portion of those wages would be a rather large addition to the social costs of monopoly. In addition, wages that are inconsistent with labor market characteristics and not uniformly sensitive to business cycles will hamper the implementation of macroeconomic stabilization programs. Previous studies in this area have usually tested the market power hypothesis by determining the relationship between industry concentration and industry wages.' In addition, studies focusing upon other aspects of interindustry wages, such as the effect of unions2 and plant size3 have included concentration as an explanatory variable in their models. Results of these studies have differed with respect to their findings on the importance of concentration. Some studies found concentration to be important in the wage determination process while others did not. The research reported in this article indicates that the concentrationwage relationship changes significantly over the business cycle making cross sectional studies sensitive to the year used for the analysis. This finding is consistent with the results of models developed to describe the wage determination process over time. The method of analysis used here focuses upon the concentration-wage relationship at two points in the business cycle. A cross sectional test of a model of interindustry wage determinants in manufacturing is presented for the years 1958 and 1967. The results of these tests indicate that six independent variables can explain over 72% of the variation in wages found in each of the two test years, with each of the six coefficients statistically significant in both years. However, the impact of the independent variables change considerably over the business cycle. Of particular interest are findings that support the hypotheses (1) that concentration's effect upon wages appears to change over the business cycle, thus providing support for the spillover hypothesis and (2) that the wage-concentration relationship is not linear.

Automatic fuel adjustment mechanisms (FAM), which allow utilities to charge higher rates as fuel costs increase, are shown to disrupt the balance of economic efficiency provided for by regulatory lag. A model is developed to analyze efficiency changes caused by asymmetrical inputs and to examine the economic implications of broadening FAM to include the cost of labor, supplies, and purchased power. The conclusions are reached that efficiency is promoted by regulatory lag and formal hearings and that policies that circumvent these procedures reward inefficient behavior in terms of utility investment decisions. 13 references.

TWO separate policy issues have led to discussion of a preferred rate of inflation: the possible choice between inflation and jobs, and the choice between taxes on money balances and taxes of other kinds. Okun (1971) for the first of these issues and Logue and Willett (1976) for the second, among others, have remarked that the discussion is typically conducted as though a more inflationary policy means a rise from one steady rate to a higher steady rate. The world might not be like that; a rise in the average rate of inflation might mean, inevitably, a rise in its variability. Okun presented some to suggest that countries with higher rates of inflation do experience more variable rates and suggested why it might be so; Gordon (1971) called the evidence into question. Logue and Willett presented further results that supported Okun's position; but their results did not support Okun in the case of highly industrialized countriesthe ones that concerned him. Below I summarize these findings and report additional that supports Okun for highly industrialized as well as other countries. The reason for Okun's concern is that variability of inflation imposes costs on the economy that we should consider when we choose a macroeconomic policy.' Section II supports the claim that there is an empirical relation across countries between the average rate of inflation and the variability of that rate; but it says nothing about the slope, or even the existence, of a functional relation between them that represents an opportunity locus for a single country. In section III, I conclude with a brief discussion of this issue.

THIS paper emphasizes the role of the industrial structure of labor demand, as it influences the array of hours of work from which women can choose, as a factor affecting labor force participation rates of women. While the rapid increase in women's labor force participation' has received a great deal of attention from economists (Long, 1958; Mincer, 1962), and the cross-sectional variation also has been studied intensively (Cain, 1966; Bowen and Finegan, 1969; Cain and Watts, 1973; Schultz, 1974), approaches to this topic have stressed micro influences and, since Mincer's influential work, have attached primary importance to obtaining consistent estimates of the income and substitution effects of conventional price theory. Recently, however, writers (Dickinson, 1974; Heckman, 1974) have suggested that in many contexts this approach should be modified to reflect the discrete set of choices workers actually face in the labor market. The manner in which this observation affects the present analysis can best be appreciated if we briefly consider the discussion of the labor supply decision found in the usual textbook analysis of the problem (e.g., Fleisher, 1970 and Rees, 1973). The conventional view is that the woman's market-determined wage sets the rate at which she can trade off leisure, usually taken to represent all non-market uses of time, for income. The representative individual is then assumed to compare her rate of substitution between income and leisure to the market rate, and to allocate that quantity of time to the market that equates the subjective and market rates of substitution at the margin. Nonparticipants in the labor force are assumed to be those women for whom the subjective rate of substitution between income and leisure exceeds the market rate at all potential levels of labor supply, during the period under study. A feature of this analysis that seems particularly objectionable is the assumption that the set of market opportunities allows for a continuous range of choice of the quantity of labor to be supplied, from, say 0 to 60 hours per week, at a relatively constant wage. This is clearly contrary to the facts. For example, a recent analysis of the data gathered for the University of Michigan's Panel Study of Family Income Dynamics (Dickinson, 1974) reports that less than 20% of all workers interviewed were free to optimize their work hours without significant reductions in their wage rates. While it may be true that the conceptual ideal of the continuous range of opportunities could be approximated by an individual choosing among a variety of occupations and industries, this is likely to apply only before many career and personal decisions have been made. With the passage of time, many of what were once decision variables to an individual, such as educational attainment, marital status, and family size, are likely to have become parameters that now serve to define the range within which choice can be exercised. For many women, the labor market in which they work can reasonably be viewed as such a constraint and the industrial structure of that Received for publication December 31, 1976. Accepted for publication May 12, 1977. * University of Texas at Austin. This report was prepared for the Office of the Assistant Secretary for Policy, Evaluation and Research, U.S. Department of Labor, under contract/purchase order no. B9J6-389 1. Since contractors conducting research and development projects under Government sponsorship are encouraged to express their own judgment freely, this report does not necessarily represent the official opinion or policy of the Department of Labor. The contractor is solely responsible for the contents of this report. IBetween 1900 and 1970 the labor force participation rates of women increased from 20% to 40%. A major component of this increase was among women with children. Participation rates for mothers with children under 6 increased over 150% between 1950 and 1972, while rates for mothers with children between 6 and 17 increased by over 60% during the same period.