Knowledge that Transforms

debt ; information ; loans

When members of the baby-boom generation began entering the work force in substantial numbers during the 1970s, the resulting crowding reduced their earnings in comparison with earlier cohorts of the same age, and wage premiums for schooling also declined. These developments raised questions about how well members of the babyboom generation might fare during their working lives compared with smaller neighboring cohorts (Finis Welch, 1979; Mark Berger, 1985). When wage premiums for schooling increased sharply during the 1980s, however, it became apparent that workers' levels of schooling were more important determinants of their lifetime earnings than the size of their birth cohort. The small decline in schooling wage premiums during the 1970s now appears to have been only a temporary interruption of a trend toward higher economic rewards for schooling. Since schooling and work experience account for about half of the variation in earnings, wage trends of the work force as a whole have been influenced by changes in its composition since the late 1960s. In addition to these compositional changes, relative wages have also changed dramatically as the number of entrants into the labor force with high schooling levels surged during the 1970s and receded during the 1980s. The purpose of this paper is to describe the relationship between changes in the schooling and work experience composition of the labor force and changes in relative wages during the past fifteen years.

The past decade has witnessed the growth of a large literature on international cooperation in trade and macroeconomic stabilization policy. Virtually all the models developed to date, however, are based on one of two extreme assumptions concerning governments' ability to commit to international agreements. Either they assume that governments can make constitutionally binding long-term agreements, or else they assume that governments have no ability to make legal commitments whatsoever. In the latter case, international policy cooperation is possible only to the extent that reputational factors will allow.' In this paper, I consider a world in which there is no legal mechanism for enforcing long-term international agreements, but where governments must still incur some small direct costs if they renege. These small costs might arise due to legislative or administrative frictions. I also allow for the possibility that international economic policy agreements can include small sidepayments. For example, in negotiating a bilateral reduction in tariffs, two allies could simultaneously agree to redistribute the burdens of defense expenditures.

Recently in this journal William E. Cole and Richard D. Sanders (1985) criticized the Todaro migration model and offered a different approach. A lively and interesting debate followed but the Cole and Sanders (CS) model was not actually solved. Indeed Michael Todaro...suggested that the model yielded no unique algebraic solution a charge to which CS...did not respond. This [one-page] note identifies the changes needed to provide closure of the CS model. (EXCERPT)

This paper presents a model of finitely lived rational agents in which unanticipated innovations in the stock of fiat money affect real variables. An unanticipated inflation reduces the real value of the nominally denominated national debt, thereby reducing the crowding-out of capital and/or the tax burden. Both effects stimulate increased investment in capital, which leads to an increase in real output and wages in the following periods. In contrast with price-surprise models, these real effects occur even if the monetary innovation is instantly and perfectly observed by agents. Copyright 1990 by American Economic Association.