Knowledge that Transforms

The present paper is a time series analysis of the relationship between consumption and income innovations. The empirical findings based on aggregate, seasonally unadjusted quarterly UK and German data suggest that the adjustment of consumption to income innovations is not instantaneous (within a quarter), and that the estimated marginal propensities to consume out of income innovations are too large to be compatible with the predictions of the rational expectations-life cycle model. It is found that the same qualitative results are obtained when the disposable income data for West Germany is disaggregated into labour income, transfer payments and profits (transferred from the business sector to households).

This paper develops an empirically estimable model of occupational choice under uncertainty, given an individual's risk preferences and human capital and given the moments of the distribution of earnings within various alternative occupations. The model is estimated using data on entry-level occupational choices of high school graduates in Maryland school districts from 1951 through 1969. Our results confirm that increasing the mean and reducing the second moment of the earnings distribution significantly increases the log odds of selecting the occupation. In addition, occupational choice is affected by school quality and home inputs.

This paper examines the influence of price d ecisions by foreign firms on export price decisions by domestic firms. The theor etical analysis develops a general model which hypothesizes a positive relation between export price and foreign price assuming international product differenti ation. This model further suggests that export price depends on foreign structur al traits as they determine foreign price. The empirical analysis, based on a cr oss- section of sixty-nine four-digit manufacturing industries matched between th e United States and Japan, provided support for the hypothesis that foreign mark et structure and foreign pricing affect export pricing and thus the observed pri ce-cost margin.

A new approach to the measurement of welfare distributional change and social mobility is developed. The novel feature of this model is the use of price dependent measures of individual and social welfare in evaluating t he magnitude and direction of the movement in the distribution. In addition, the proposed indexes of mobility are decomposed into the sum of between-group and w ithin-group mobility. Each measure is implemented for the United States over the period 1947-1982. It is found that in each year society is upwardly mobile rela tive to the 1947 distribution.

sumer reliance upon advertising since these mechanisms substitute as sources of product/vendor information. One can predict, therefore, that when relative prices favor consumer reliance upon advertising as information, producers will respond accordingly. This prediction also received empirical verification-advertising intensity by sellers in the mobile Washington, D.C. area greatly exceeded advertising intensity in the relatively stable Baltimore, Maryland area.

A bstract-A portfolio choice model is formulated which focuses on the possibility of inflation hedging motives in housing demand in the 1970s. An asset demand equation is used to estimate the capitalization of inflation expectations into house prices through tax, mortgage, and hedging effects. The empirical results indicate that, even after accounting for tax and mortgage effects, the hedging motive was significant in bidding up house prices. One implication is that the tax effects of inflation may have been overstated in previous research that ignored inflation risk.

In estimating a production function for an economy, constant returns to scale has been a traditionally maintained hypothesis. In modelling Switzerland's gross output as a function of labor, capital and imports, a general functional form is selected which displays increasing returns to scale and is not Hicks-neutral. It is a technology which is labor saving, import saving and capital using. This paper also quantifies the mismeasurements associated with using a constant returns to scale model to estimate such variables as own-elasticities of demand, elasticities of substitution, impacts on factor income and rate of technical progress.