Knowledge that Transforms

A FTER three decades of intensive government efforts to improve the lot of those at the bottom of the economic heap, the poor are very much with us, and many are both ill-fed and ill-housed. The various measures taken to improve housing conditions among the poor remain to be evaluated; habitability laws are an example. These laws regulate the relationship between landlord and tenant in that they require the former to provide housing in habitable conditions. By subjecting a lease to the doctrine of caveat venditor, rather than caveat emptor as was done before at common law, these laws greatly extend the warranty of habitability. They provide tenants with remedies in the form of repair and deduct, rent withholding and receivership laws, supplemented by laws that prohibit retaliatory eviction. Good summaries of these laws can be found in a number of places (American Law Institute's Restatement (Second) of Property, Landlord and Tenant, 1974 and Hirsch et al., 1975). This paper examines the welfare effects of habitability laws with respect to indigent tenants. This examination, carried out within a demand-supply system, must take into account the intricate and unique aspects of housing as a commodity. Housing is a complex commodity having both stock and flow characteristics. Our interest is mainly in the latter, i.e., the flow of housing services, an area with serious measurement problems. Specifically, in the day-to-day world we find data neither on the quantity of rental housing services nor on their price. Therefore, a hedonic approach to rental housing services, which estimates empirical rent functions, is used. In this manner, the distinctive characteristics of a rental unit are measured and expressed in a single quantity which reflects the market's consensus about their relative importance. The hedonic approach can, thus, provide shadow housing quantities and prices. Used in conjunction with conventional demand and supply variables, plus habitability law variables, demand and supply functions will be estimated. Finally, these functions permit statements about the effects habitability laws are likely to have on the welfare of landlords and tenants. Specifically, to the extent that such laws are enforced and lead to improved repair and maintenance, tenants' well-being will be enhanced and an upward shift of the demand function will occur. On the supply side, habitability laws can affect maintenance and repair decisions, which together with the potential legal costs will also lead to an upward shift of the supply function. The crucial matter is the relative shift of these two functions and the statistical significance of their difference.

M UCH research has been done in recent years examining the differentials in earnings of men and women in particular occupations.' While these studies have contributed considerably to our understanding of this earnings gap, they tend to accept the occupations as given and do not examine the extent to which men and women have a different occupational distribution or question the reasons for it. In some types of jobs this question does not arise at the time the person enters the labor market. For example, when highly specialized skills are required, as is the case for most professions and crafts, only those trained in relevant skills are recruited. But there are many other positions at the entry level for which only general requirements, such as intelligence, literacy, motivation, or, in some cases, physical strength are needed. Theie are also many higher level positions that are filled through upgrading and promotion from the lower levels. In such labor markets employers, and perhaps employees, are likely to have considerable discretion with respect to placement of particular individuals into either a ladder-type or a dead-end job. If gender plays a significant role in this decision, any measure of achievement and rewards that is restricted to initial placement differences within job categories may seriously underestimate the effect of sex-discrimination on subsequent promotions and earnings. A number of investigations have found segmented markets for labor, each marked by differences in wages and career progression.' One study of male workers specifically noted that onthe-job training and type of starting position are crucial because they are the beginning of a dynamic process which continually affects the employee's earnings. The same study showed that starting in the high and middle skill sectors is consistently associated with higher earnings later on.3 In this paper we shall focus on the extent to which men and women are found in different entry jobs and how this affects their later earnings.4 Finding women in entry jobs which do not lead to high earnings in the long run need not be to their disadvantage if their labor force participation tends to be intermittent. It has been argued (e.g., Johnson and Stafford, 1974; Polachek, 1979) that women take jobs that pay relatively well initially but do not provide valuable training leading to great increases in earnings because they expect to drop out of the labor market in any case. This hypothesis would be supported by findings that women are paid more than men with comparable qualifications initially, and hence earn more for the limited period they expect to remain in the labor market, even though other jobs pay better later on. If, on the other hand, men earn as much or more to begin with, we cannot ascribe their higher earnings in later years to their greater willingness to invest in their own training on the job.

P AUL COOTNER stimulated significant research on the subject of speculative markets in both commodities and equities. His papers (1960, 1964, 1967) were original and provocative. One paper began with the statement: subject matter of this paper is bound to be considered heresy. I can say that without equivocation, because whatever views anyone expresses on this subject are sure to conflict with someone else's deeply held beliefs (1964, p. 231). Most of the papers concerned with the operation of futures markets in commodities test the 'efficiency of the market by examining the stochastic nature of futures prices (which Samuelson refers to as the Idiot of Chance).' In particular, it is asked whether the price of a futures contract is a martingale. Cootner's contention, which runs counter to the tide of academic writings, is that speculative prices are not random walks but are constrained by economically determined barriers (1964, ch. 11). The present paper is in the spirit of Cootner's thinking about the economic and welfare implications of speculative markets. My main conclusions are as follows. (1) The optimality of resource allocation (defined as the sum of consumer and producer surplus) depends upon the accuracy of the forward price, at the time production decisions are made, as a forecast of the subsequent spot price when consumption occurs. The existence or nonexistence of the martingale property of futures prices between these two dates is irrelevant for welfare purposes. (2) Social loss is a multiple of the square of the forecast error between the forward price and the subsequent spot price. Expected social loss is irreducible when the forward price is equal to the mathematical expectation of the subsequent spot price. (3) The longer the period between the production decisions and the subsequent consumption decisions, the greater the bias between the forward price and subsequent spot price. (4) It has been claimed that in an efficient market, the spot price at time t should just depend upon the price at t 1 and not upon earlier prices. It is proved that this situation is neither a necessary nor a sufficient condition for rational expectations. (5) Therefore, there is a tenuous connection between the stochastic nature of speculative price and measures of economic welfare; but there is a direct connection between the forecast errors and economic welfare.

Livelihood measures of foregone and compensating earnings are frequently used as measures of economic losses due to realized or potential damages to the health of labor in-puts. Both measures as they have been used are incomplete, though for quite different reasons. The narrowness of the foregone earnings mea-sure is widely acknowledged. As set forth in Smith (1974), Thaler and Rosen (1976), and Viscusi (1979), the compensating earnings measure, with its emphasis upon the earnings premia workers require to be willing to be exposed to job hazards they perceive, certainly has broader analytical appeal. However, as empirically implemented, these studies too are incomplete: they deal with worker and time aggregates allowing only crude measures of differences in reward structures, mixes of complementary inputs, work-day lengths, risk aversions, worker effort, and other dissimilar factors across individuals, firms, and industries. In this paper, the productivity changes and consequent earnings adjustments that occur under differing work conditions for 17 individual citrus pickers in southern California are assessed. Interest is centered upon the acute effects of two environmental factors, ambient ozone (03) and ambient temperature, upon the daily work performances of these individuals. Since each individual is separately analyzed, the host of plausible confounding influences (e.g., experience, biological endowments, health histories, etc.) to which one must devote attention when dealing with the fictional "representative" individual are relevant here only insofar as they change within the short time periods being considered.

David Greenberg, Robert Moffitt, John Friedmann, Underreporting and Experimental Effects on Work Effort: Evidence from the Gary Income Maintenance Experiment, The Review of Economics and Statistics, Vol. 63, No. 4 (Nov., 1981), pp. 581-589

A potentially important parameter that has not yet been convincingly estimated is the critical concentration ratio. This paper attempts to estimate it in three types of market. The estimation of a critical concentration ratio, if one exists, seems of potentially great importance because of its implication for antitrust policy. If a critical concentration ratio were found and if concentration had no effect below that level, it would seem to follow that a horizontal merger in a market where concentration was below the critical level and where the merger could not increase concentration to the critical level could not substantially lessen competition or tend to create monopoly.

THE theoretical and empirical investigations of the relationship between market structure and the firm's incentive to invent and innovate have concentrated on the effects of the structure of the supply side of the market. This focus on the supply side originated in Schumpeter's controversial hypothesis that current market power provided the necessary conditions and future market power provided the incentive for technical change (Schumpeter, 1950). This hypothesis stimulated a vast number of theoretical refinements and empirical tests of relations between research and development activity (R&D) and supply side characteristics such as concentration, firm size, and diversification. This literature has been well summarized by Kamien and Schwartz (1975) and Scherer (1980). The analysis of the effects of the buyer market structure on the selling industry conduct and performance has been limited, both theoretically and empirically. Stigler (1964) modeled the effects of the size distribution of buyers on price competition in oligopoly. Telser (1964) devel-, oped a theory of messages in which he suggested that advertising would increase when buyers were many and small. Lustgarten (1975) tested the effects of buyer market structure on price cost margins and advertising and found the relations suggested by Stigler and Telser. Invention and innovation are forms of competition which, like price and advertising, will be affected by both buyer market structure and seller market structure. However, unlike price and advertising competition, there have not been explicit attempts to establish theoretical and empirical relations between buyer market structure and inventive and innovative activity. The effects of buyer market structure on the selling industry's incentive to invent and innovate is relevant to interpreting the effects of seller market structure on this effort. A number of previous studies of the effects of seller market structure on technical change have found that seller concentration may have a slight positive impact on inventive and innovative effort (Kamien and Schwartz, 1975, p. 20). Even this weak relation may be due to not controlling for buyer market structure. If Galbraith's (1952) countervailing power hypothesis is correct (Lustgarten, 1975, p. 128), concentration in the buyer and seller markets may be positively correlated. If buyer market concentration is positively related to inventive and innovative effort in the selling industry, the empirical estimate of the partial effect of seller concentration will be biased upward. This paper investigates the effect of buyer market structure on R&D effort. Section II draws together the literature that is relevant to the issue of the relation between buyer market structure and seller inventive and innovative activity. Section III develops a simultaneous equation model of R&D activity where R&D, advertising and concentration are endogenous variables. Section IV uses data on scientific and engineering inputs to test this model. Section V summarizes these results.

effects of the tax holiday program in Puerto Rico on the behavior of firms locating there. The tax holiday program in Puerto Rico was initiated in 1949, and is often cited as the most successful example of the use of incentives to encourage the location of industry. Discussions of the costs and benefits of this type of program generally focus

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