Knowledge that Transforms

This paper considers a dynamic real exchange model of international trade in commodities and equities. Given “generalized Cobb-Douglas” intraperiod tastes that differ across countries, we find a closed-form solution with properties that are noteworthy, not because they reverse our presumptions, but because they exceed them. A consumption-based model of international equity investment might be expected to have the following properties: (i) The optimal portfolios should reflect the international pattern of commodity expenditure. (ii) A country’s portfolio should be biased toward equities in commodities that attract a large share of its expenditure. (iii) A country would short some equities, given an appropriate structure of equity returns. (iv) Short sales of equities would allow the international economy to move toward the situation that would prevail if risk markets were complete. In our model solution, these properties take strong forms:

A child's welfare is affected not only by the wealth of her parents, but also by the quality of care her parents provide. Physical abuse, neglect, and other forms of child maltreatment impose severe hardships on children and may adversely affect them as adults (Cathy Widom, 1989). We examine whether child maltreatment is affected by the socioeconomic circumstances of parents. Our hypothesis is that children are more likely to be maltreated if their parents have fewer resources. We use a broad conception of "resources." It encompasses not only income, but also parental time and the quality of parental time. For example, a low-income working single mother may be short on resources needed to parent not only because she earns a low income, but also because she may not have the physical or emotional reserves to care for her children properly at the end of the day. Likewise, an unemployed father may provide less than adequate parenting not only because his income has been reduced, but also because of the depression and loss of self-esteem that may accompany unemployment (Arthur Goldsniith et al., 1996). We use state-level panel data to analyze the impact that socioeconomic circumstances (in particular, parental work status and single parenthood) have on the incidence of child maltreatment. We find that socioeconomic circumstances do matter. States with higher fractions of children with absent fathers, and especially absent fathers and working mothers, have higher rates of child maltreatment. Nonworking fathers are also associated with higher rates of maltreatment.

One of the most glaring legacies of 20thcentury Chinese socialism is a sharp and widened divide between China's urban and rural areas. China's widened urban-rural divide arose from a socialist industrialization process, which created a hastened heavy-industrial base at the expense of its rural population. China's vast rural population not only endured a standard of living far below that in the urban sector, they were also denied access to many social welfare benefits and social-mobility opportunities (Martin King Whyte, 1996). This urban-rural gap in social and economic wellbeing, together with a massive reservoir of rural surplus labor and an acute shortage of consumer goods, formed the driving forces for China's change of migration-control policy and for the rapid increase of rural migrants in Chinese cities. Though the exact number of migrants is still hard to ascertain, due to both a lack of consensus in the definition of migrant and the absence of an authoritative national survey, migrants' prominent presence in Chinese cities is hardly disputable. In China's largest cities, for instance, it is often quoted that at least one out of every five persons is a migrant, and most likely a migrant from rural areas. In Shanghai, the number of migrants rose tenfold in one decade: from 0.26 million in 1981 to 2.81 million in 1993. The percentage of local residents who were migrants correspondingly rose from less than 5 percent in the early 1980's to 21.7 percent in 1993 (Changming Sun, 1997). In Beijing, the number of migrants was 3.29 million in 1994, compared to a locally registered population of 10.63 million for the whole municipality, and 6 million for its city districts (Dangsheng Ji et al., 1996 p. 95). In city districts, one out of every three persons in Beijing is a temporary migrant from elsewhere. Most of these recorded migrants are also genuine migrants, not short-term visitors: more than 60 percent had stayed for more than half of a year, and only 17 percent had been in Beijing for less than one month. Three-quarters of all the surveyed migrant population listed business or employment as their purpose of stay (Ji et al., 1996 pp. 96-97). Rural migrants account for over threequarters of all migrants in large Chinese cities. In Shanghai, for instance, a survey in 1995 found that 88.1 percent of all migrants had their place of household registration in the countryside (Wang and Zuo, 1997). Similarly, in Beijing, where one expects to see a higher circulation of urban to urban migrants, close to 80 percent of migrants surveyed in late 1994 were peasants before moving into Beijing (XiuhuaLiu, 1996 p. 112).

In his Presidential Address five years ago, Zvi Griliches (1994) called attention to the severe difficulties that beset current attempts to measure the growth of labor productivity in the American economy. Because of these difficulties, it is likely that the true rate of economic growth is substantially underestimated. The root of the problem is the difficulty in measuring output in the service sector which now represents two-thirds of the economy. In such sectors as health care and information services, the contribution to gross domestic product (GDP) is measured by inputs rather than outputs, a procedure that makes it impossible to gauge accurately improvements in the quality of output. Thus, in the case of computers, which are transforming American society, economists have been unable, so far, to find a measurable contribution of computers to the rise in labor productivity—an astonishing paradox. I want to follow up on this problem of mismeasurements. My thesis is that the profession

Using state-by-state voting data for U.S. presidential elections, we observe that voter turnout is a positive function of predicted closeness. To explain the strategic component of political participation, we develop a follow-the-leader model. Political leaders expend effort according to their chance of being pivotal, which depends on the expected closeness of the race (at both state and national levels) and how voters respond to their effort. Structural estimation supports this model. For example, a 1-percent increase in the predicted closeness at the state level stimulates leaders' efforts, which increases turnout by 0.34 percent.

Unemployment in the United States has been below its presumed NAIRU ( nonaccelerating-inflation rate of unemployment) of 6 percent for more than four years. The doctrine or dogma of the NAIRU led to the expectation that an unemployment rate below the NAIRU would make accelerating inflation inevitable; but by all measures inflation has, if anything, declined and shows no signs of increasing. The NAIRU doctrine has had a major role in macroeconomic theory and monetary policy for several decades. For example, the seven hikes in interest rates by the Fed in 1994–1995 seem to have been motivated not by concerns about existing inflation (CPI-U inflation was steady and below 3 percent) , but by fears that an unemployment rate falling toward the 6-percent level, and then below 6 percent in September 1994, would foster future inflation. Theoretical and statistical criticisms of the NAIRU have been growing (see e.g., Robert Solow, 1986; James Tobin, 1993; Eisner, 1994; Rod Cross, 1995 [ essays by Cross, Frank Hahn and Tobin ] ; Ray Fair, 1996; Olivier Blanchard and Lawrence Katz, 1997;

Longevity Complementarities under Competing Risks by William H. Dow, Tomas J. Philipson and Xavier Sala-i-Martin. Published in volume 89, issue 5, pages 1358-1371 of American Economic Review, December 1999

The 44 Liquormart decision, eliminating Rhode Island's ban on liquor price advertising, made Rhode Island the subject of a natural experiment for measuring the effect of advertising on prices. Using Massachusetts prices as controls, we find that advertising stores substantially cut only prices of the products that they advertise. Prices of other products, at both advertising and nonadvertising stores, do not change. Advertising stores cut their prices on products advertised by rivals, while nonadvertising stores do not. We find no reductions in price dispersion across stores. Newspaper-advertising stores appear to draw a higher share of customers after they advertise.

This paper examines how population growth affects the average level of utility particularly the consumption per capita. It also focuses on the effects of population growth on the ratio of dependent consumers to working-age adults. The model employed in this paper has three demographic groups: working-age adults who produce and consume and the young and elderly who only consume. This study concluded that the transition to lower population growth requires a long period of reduced dependency in which society benefits from lower spending on children while it has yet to pay for higher old-age dependency. The dependency level after 30 years is not significantly different from that which would exist in an optimal stable population. Any rise in fertility that would decrease old-age dependency in the long run would require a lengthy period of higher-than-steady-state dependency.