Knowledge that Transforms

We use unique data from the Medicaid program of the Commonwealth of Kentucky to examine the duration of Medicaid spells. The data set consists of a one-in-ten sample of all Medicaid recipients in Kentucky on July 1, 1986, and a similar sample of all new spells between July 1, 1986, and June 30, 1987. Because the beginning date of Medicaid recipiency is known for all spells, this mixed "stock" and "flow" sample allows us to identify the duration of Medicaid spells for up to twenty years. This is in contrast to other studies using short panels of new spells. We find significant differences in hazard functions across program eligibility categories, suggesting that the cost of expanding Medicaid or the savings from contracting it would vary depending on the eligibility group affected by the change in policy.

This note asks: “How much income does it take to preserve the prechild standard of living for all members of the postchild household?” Equivalence scales for Canadian two-parent families are estimated using a complete demand system approach and imposing the condition of equiva-lence scale exactness/independent of a base (Blackorby and Donaldson (1993), Lewbel (1989)). This approach has several advantages: (1) It is formally grounded in economic theory. (2) The income required for children can be estimated without ignoring the well-being of the children themselves. (3) The estimates obtained appear reasonable relative to others currently available in the literature.

In recent years a growing number of countries have constructed data series on job creation and job destruction using establishment-level data sets. This paper provides a description and detailed comparison of these new data series for the United States and Canada. Pint, the Canadian and United States industry-level job creation and destruction rates are remarkably similar. Industries with high (low) job creation in the U.S. exhibit high (low) job creation in Canada. The same is true for job destruction. In addition, the overall magnitude of gross job flows in the two countries is comparable. Second, the time-series patterns of creation and destruction are qualitatively similar but do differ in a number of important respects. In both countries, job destruction is much more cyclically volatile than job creation. This cyclical asymmetry is, however, more pronounced in the United States. The paper finishes with a characterization of the job flow patterns using a modified

We study the problem of measuring the uncertainty of computable general equilibrium (CGE) (or RBC)-type model simulations associated with parameter uncertainty. We describe two approaches for building confidence sets on model endogenous variables. The first uses a standard Wald-type statistic. The second approach assumes that a confidence set (sampling or Baycsian) is available for the free parameters, from which confidence sets are derived by a projection technique. The latter has two advantages: first, confidence set validity is not affected by model nonlinearities; second, we can easily build simultaneous confidence intervals for an unlimited number of variables. We study conditions under which these confidence sets take the form of intervals and show how they can be implemented using standard methods for solving CGE models. We present an application to a CGE model of the Moroccan economy to study the effects of policy-induced increases of transfers from Moroccan expatriates.

The interpretation of seasonality in terms of economic behavior depends on the form of the econometric time-series model that allows for a description of seasonality. Popular models often assume either approximate deterministic seasonality (cf. Miron (1996)) or stochastic trend seasonality (cf. Hylleberg (1994)). Inference from an inappropriate model can be shown to be invalid. Since much graphical evidence clearly suggests that seasonal fluctuations are not constant over time, we investigate whether the finding of seasonal unit roots can be due to neglected mean shifts. We provide relevant asymptotic theory and critical values for various test statistics. For a set of real gross domestic product series we find that much evidence for seasonal unit roots tends to disappear when a shift in the seasonal means is allowed. When we incorporate deterministic mean shifts in the deterministic seasonality model, we find that qualitative results on the presence of the so-called seasonal cycle documented in, for example, Miron and Beaulieu (1996) are robust.

We reformulate the “Hotelling valuation principle” to take into account the special production characteristics of hard-rock minerals. The data requirements of the revised model are still parsimonious, but the resultant valuations are some 40% below those produced by the Hotelling valuation principle. Our valuation equations are also “user-friendly,” allowing the valuer to specify price and cost expectations that need not comply with the Hotelling rule. Empirically, our model provides estimates of market value for producing mineral properties that are more accurate than those produced by the Hotelling valuation principle.

In 1978 BLS adopted an estimator for U.S. CPI component indexes that incorporates scientific samples of outlets and varieties and that allows the calculation of reliable standard errors. Consumer substitution of outlets and varieties offering better values could cause bias in these indexes. A more important source of bias is, however, a tendency to give excessive weight to items whose initial price is temporarily low. The empirical evidence is striking. Average price series and matched food CPIs grew at almost the same rate before 1978, but between 1980 and 1992 the CPIs average about 1.4% per year more growth. For unleaded gasoline, the discrepancy averages 0.8% per year.

We generalize the Franke-Härdle (1992) spectral-density bootstrap to the multivariate case. The extension is nontrivial and facilitates use of the Franke-Härdle bootstrap in frequency-domain econometric work, which often centers on crossvariable dynamic interactions. We document the bootstrap's good finite-sample performance in a small Monte Carlo experiment, and we conclude by highlighting key directions for future research.

Bayesian inference and model comparisons are easily performed quite accurately using Gibbs sampling, even if (1) the likelihood is analytically intractable and (2) nonstandard prior probability density functions (pdfs) are required. In this study Bayesian model comparisons are performed among five competing theories of endogenous protection. Tariff and nontariff barrier data from 1983 between the United States and five OECD partner countries-Japan, France, Germany, Italy, and the United Kingdom-are used in the analysis. Posterior odds based on two priors show special-interest models to be more likely than other models in determining U.S. protection.