Knowledge that Transforms

The authors employ the Cooley-Prescott adaptive model to examine for functional misspecification in three commonly used exchange rate expectation models. They also test for heterogeneity among forecasts. The authors find no serious misspecification problem but some heterogeneity in expectations. These test results are confirmed by various other regression specification tests. Copyright 1994 by MIT Press.

This article investigates changes over time in the substitutability of paralegals for other employees within the law firm. The substitutability between paralegals and associate lawyers does not seem to have increased over time; if anything, the increased role for paralegals has been accompanied by increased specialization of tasks performed. In fact, in the largest legal markets and the legal practices employing the most specialized attorneys, paralegals and associates appear to be complementary inputs. In contrast, there is some evidence that secretarial and clerical workers have become more substitutable for professional workers in the law firm. Copyright 1994 by MIT Press.

Willard F. Mueller and Frederick E. Geithman (1991) test the competing free-rider (efficiency) and market-power explanations of certain vertical restraints once used by the Sealy mattress company and declared illegal after 1980. They estimate that eliminating the restraints increased sales and argue that this supports only the market-power explanation. However, Mueller and Geithman overlook the rise in Sealy's profits that occurred after 1980, a fact which renders their test inconclusive. Copyright 1994 by MIT Press.

This paper considers two problems that frequently arise in dynamic discrete choice problems but have not received much attention with regard to simulation methods. The first problem is how to simulate unbiased simulators of probabilities conditional on past history. The second is simulating a discrete transition probability model when the underlying dependent variable is really continuous. Both methods work well relative to reasonable alternatives in the application discussed. However, in both cases, for this application, simpler methods also provide reasonably good results. Copyright 1994 by MIT Press.

This paper used a general equilibrium framework to examine the macroeconomic consequences of the recent failures and subsequent bailout in the savings and loan industry. We distinguish between the losses in the capital stock, the economic effects of alternative methods of funding those real losses, and the intertemporal transfer of real resources implicit in backing the financial assets used. We then embed the analysis in a general equilibrium, multi-country model with intertemporal budget constraints that allows for the interaction of intertemporal adjustment and expectation revisions. The more complete model is used to explore the consequences of the S&L debacle on the evolution of the U.S. economy during the 1980's and 1990s.

The major emphasis in previous money demand studies has been at the aggregate level, with little systematic attention paid to sectoral differences in money holding behavior. This paper attempts to address the latter issue by focusing on more homogeneous subgroups to gauge money holding patterns. We apply cointegration theory to identify long-run money demand functions for the household and business sectors of the U.S. economy. In general, our results, which are based on the 1960-1990 U.S. monetary experience, suggest substantial sectoral divergences in long-run relationships. In particular, the household sector reveals more stable relationships. The business sector indicates strong interest elasticities, which are found to be negligible for the household case. These findings are invariant to alternative money definitions and for different sample periods. Copyright 1994 by MIT Press.

Jeffrey I. Bernstein, Exports, Margins and Productivity Growth: With an Application to the Canadian Softwood Lumber Industry, The Review of Economics and Statistics, Vol. 76, No. 2 (May, 1994), pp. 291-301

Models of wage determination suggest a positive association between monopoly power and the ability of employers to discriminate. Past research on this issue has confused the influence of race, unionization, and market structure. This study measures racial wage differentials for four market structure-union status groups: union members employed in low- and high-concentration industries and nonmembers employed in low- and high-concentration industries. There is modest, but persistent evidence of larger racial wage differentials in high-concentration industries for nonunion workers. Market structure does not, however, influence racial wage differentials for union members. Copyright 1994 by MIT Press.