Knowledge that Transforms

T'HIS paper presents evidence on the shortrun characteristics of purchasing-power parity (PPP) theory when account is taken of the fact that the relationship between currency purchasing powers and exchange rates is distributed over time. Distributed-lag variants of PPP theory are tested using price-level data and exchange rates between fourteen foreign currencies and the United States dollar during the period of floating exchange rates in the early 1920's. The findings suggest that in most cases the major impact of price-level movements occurred within a few months following the initial disturbance, and that the distributed effects were largely dissipated within a year's time.

C. Lluch, R. Williams, Cross Country Demand and Savings Patterns: An Application of the Extended Linear Expenditure System, The Review of Economics and Statistics, Vol. 57, No. 3 (Aug., 1975), pp. 320-328

Peter Schmidt, The Small Sample Effects of Various Treatments of Truncation Remainders in the Estimation of Distributed Lag Models, The Review of Economics and Statistics, Vol. 57, No. 3 (Aug., 1975), pp. 387-389

W HILE debate rages on, it seems only a matter of time before some form of national health insurance becomes a reality. Aside from the central questions regarding coverage, financing, and eligibility, an important issue involves the administration of such an insurance program. A recent analysis of 13 proposed national health insurance bills found that 10 of the bills include the existing industry to one degree or another.' This strategy makes sense because of the expertise and machinery that presently exist within the health insurance industry. If such a strategy is adopted, the fundamental problem of allocating the administrative responsibility remains. There is wide disparity in the average costs of administration among the insuring organizations. Ideally, designation of responsibility for administering any national health insurance program should be based upon efficiency considerations. To the extent that economies of scale are present within the administrative function of existing health insurers, centralization in one or a few hands can be justified. In contrast, if economies of scale are not present, administrative responsibility should be decentralized on efficiency grounds. The purpose of the present paper is to examine the administrative cost experience of the commercial health insurers in an effort to determine whether economies of scale exist.

IN spite of the interest in advertising, research in the field has not been very impressive. The reason for this is simply that problems presented in marketing and advertising are often unique, and their satisfactory solutions require the development and synthesis of their own body of theory. This body is lacking.1 In Australia, in particular, advertising has not attracted a large amount of research. This is mainly because of the slowness with which marketing has been accepted as a separate subject of study in our universities, the lack of official statistical information on advertising, and the reluctance of Australian companies to disclose information on their marketing promotion efforts and expenses. The aim of this study is to analyse the marketing competitive behaviour of eight consumer goods producers, which economists and marketing analysts claim to be advertising heavily in Australia (Metwally, 1973a). In particular we estimate the magnitude of advertising expenditure consistent with the object of profit maximisation, and compare it with the actual expenditure of some dominant firms producing those commodities. In section I, we develop a mathematical model of demand similar to that of Dorfman and Steiner (1961). Section II considers the form of functional relationship that exists between sales, price and advertising. In section III different econometric models of competitive interdependence are compared and evaluated. Finally in section IV, the findings and their main implications on promotional competition are discussed. I

There has been disagreement in recent years' about the merits of empirical studies, pioneered by Ridker and Henning (R-H) in this Review,2 measuring the relationship between property values and air pollution within a metropolitan area. In these studies multiple regressions of property values on air pollution and other housing characteristics, and sometimes on income, are performed for crosssectional data within a metropolitan area. Unfortunately, the debate has centered on the prediction of changes in aggregate property values in response to changes in overall pollution levels. This has obscured the central issue, which is the measurement of the costs of pollution from the point of view of willingness-to-pay.3 Where the discussion has touched on this question, it has failed to recognize a straightforward argument by which the use of these empirical studies for cost-benefit analysis can be justified. Anderson and Crocker (A-C) and Polinsky and Shavell (P-S) both use the unrealistically strong assumption of identical tastes to argue that the regression can identify the parameters of a demand curve.4 Freeman (1971, p. 416) correctly points out that, in the real world, such a regression cannot isolate demand from supply elements; but he apparently does not realize how much information can be culled from the properties of the resulting equilibrium situation.5

F. Gerard Adams, Carl G. Brooking, Norman J. Glickman, On the Specification and Simulation of a Regional Econometric Model: A Model of Mississippi, The Review of Economics and Statistics, Vol. 57, No. 3 (Aug., 1975), pp. 286-298

EDUCATION may have productive value in agriculture both because it may enable a farmer to produce more output with given inputs of other factors and because it may help him in obtaining and using information for managerial decisions on the purchasing of factor inputs and the choice of products to produce.' This study deals with the second of these two roles: it attempts to measure the influence of education on the cost-efficiency with which farmers combine various broadly defined inputs. The data refer to counties in Indiana, Illinois, Iowa and Missouri and were taken from the 1959 and 1964 U.S. Censuses of Agriculture. Section II sets out the basic model and section III describes the data, the estimation methods and the results obtained. Section 5 of the Appendix gives further details of the data used. The most important finding is that, at a given scale of production, farmers with above average levels of education managed to operate significantly nearer than average to the theoretically estimated point of minimum cost. This finding is consistent with the results of a study by Huffman (1972).

Nicolas Spulber, Kamran Moayed Dadkhah, The Pioneering Stage in Input-Output Economics: The Soviet National Economic Balance 1923-24, After Fifty Years, The Review of Economics and Statistics, Vol. 57, No. 1 (Feb., 1975), pp. 27-34

EMPIRICAL studies tend to confirm the existence of a male-female wage differential based on sex. However, the proportion of the differential attributable to discrimination differs widely, reflecting the problems of adjusting for differences in experience, education, training, absenteeism, and turnover as well as differences in the occupational distribution of females. In the U. S., studies by Fuchs (1971), Cohen (1971) and Oaxaca (1973) imply a proportionate, unadjusted male-female wage differential (Win Wf)/Wf, of about 50%o-80%. Differences in such factors as experience, education, training, absenteeism and turnover account for about half of the gross wage differential. Most of the remaining half is attributed to females being employed in low-wage occupations, a factor not controlled for in their analyses. Sanborn (1964) does adjust for the occupational distribution of females and estimates a differential of approximately 15% within an occupation. Studies by McNulty (1967) and Buckley (1971) also indicate male wages to exceed female wages by about 20%o within select, narrowly-defined occupations (but not within the same establishment). They attribute about half of this differential to females being concentrated in low-wage establishments.