Knowledge that Transforms

A stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales. This paper presents a model of production decisions with demand uncertainty that incorporates nonnegativity constraints on inventories. Even with no productivity shocks, optimal behavior by the firm is consistent with this stylized fact, either if demand exhibits positive serial correlation, or if the firm can backlog excess demand.

The Heckscher-Ohlin-Vanek model predicts relationships among industry input requirements, country resource supplies, and international trade in commodities. These relationships are tested using data on twelve resources, and the trade of twenty-seven countries in 1967. The Heckscher-Ohlin propositions that trade reveals gross and relative factor abundance are not supported by these data. The Heckscher-Ohlin-Vanek equations are also rejected in favor of weaker models that allow technological differences and measurement errors.

[A local governmental welfare function is specified to explore two of its central characteristics: the equity-productivity tradeoff and differential weights across neighborhoods. The model is estimated using service outputs (safety) in the welfare function, as opposed to publicly provided inputs (police), over neighborhoods. The equity-productivity tradeoff is found to be considerable, and not all neighborhoods are weighted equally. The estimation results raise several questions about accepted analysis of governmental behavior.]

[This paper generalizes the Global Correspondence Principle by extending, in two major ways, Paul Samuelson's 1971 analysis of the exchange rate response to an international purchasing-power transfer. We analyze the price effect of a shift in any parameter, not necessarily a transfer. We then explore the resulting adjustments in any nonprice variable such as welfare. As our analysis shows, the direction of these adjustments depends neither on whether they are small or large nor on whether equilibrium is locally stable or unstable.]

This paper examines interregional commodity trade in a "Tiebout Economy," that is, a many-region economy with perfect labor mobility and endogenous government decision making. For a model with scale economies in public good consumption, it is shown that any equilibrium is both Pareto efficient and asymmetric: regions containing the same types of individuals and production possibilities nevertheless differ in the traded goods which they produce and the public good levels which they provide residents.