S. Scotchmer has shown that, even if the population is homogeneous, hedonic prices do not correctly measure long-run benefit s of a large public project. This paper examines the direction of err ors and shows that the use of cross-sectional land rent differentials leads to overestimation of the benefits. The short-run benefits with fixed lot size are also considered. Copyright 1988 by The Econometric Society.
This paper contains an equilibrium model of the labor market. The supply function allows f or temporal substitution in response to wage fluctuations, and the de mand function allows for adjustment costs. Two related issues are emp hasized: identification of supply and demand functions, and sources o f serial correlation in employment and real wages. When the supply an d demand shocks are AR(1) processes, the equilibrium process for empl oyment and real wages is a restricted VAR(2). The supply and demand f unctions are (locally) identified using only employment and real wage data. An illustrative application is presented, using U.S. data for 1948-71. Copyright 1988 by The Econometric Society.
The authors consider auctions for a single indivisible object when bidders have information about each other that is unavailable to the seller. They show that the seller can use this information to his own benefit, and they characterize th e environments in which a well-chosen auction gives him the same expected payoff as that obtainable were he able to see the object und er full information. This hinges on the possibility of constructing lotteries with the correct properties. The authors study the problem for auctions where the bidders have dominant strategies and those where the relevant equilibrium concept is Bayesian-Nash. Copyright 1988 by The Econometric Society.
This paper extends the Pearson chi-square testing method to nondynam ic parametric econometric models, in particular, to models with covar iates. The paper establishes the asymptotic distribution of the test statistic when the test statistic is based on data-dependent random cells of a general form and on an arbitrary asymptotically normal estimator. These results a re attained by extending recent probabilistic results for the weak convergence of empirical processes indexed by sets. The chi-square test that is introduced can be used to test goodness-of-fit of a parametric model, as well as to test particular aspects of the parametric model that are of interest. Copyright 1988 by The Econometric Society.
This paper establishes an inequality that may be used to test the null hypothesis that a stock price equals the expected present discounted value of its dividend stream, with a constant discount rate.The inequality states that if this hypothesis is true, the variance of the innovation in the stock price is bounded above by a certain function of the variance in the innovation in the dividend.The bound is valid even if' prices and dividends are nonstationary.The inequality is used to test the null hypothesis, for some long term annual U.S. stock price data.The null is decisively rejected, with the stock price innovation variance exceeding its theoretical upper bound by a factor of as much as twenty.The rejection is highly significant statistically.Regression diagnostics and some informal analysis suggest that the results are more consistent with there being speculative bubbles in the U.S. stock market than with a failure of the rational expectations or constant discount rate hypothesis.
This paper is concerned with the amount of communication that must be provided to implement a performance standard by a mechanism whose stationary messages have the Nash property. In p articular, the authors study implementation of Walrasian allocations in exchange environments. They show that the smallest message space t hat implements Walrasian allo-cations is one of dimension, roughly, n E (. 1 1)& ./(n 1 1), where . is the number of commodities and n the number of agents. The authors exhibit an implementing mechanism whos e message space has that dimension. Copyright 1988 by The Econometric Society.
This paper analyzes aspects of optimal fiscal policy for economies with capital ac cumulation and finitely-lived, heterogeneous agents. For a particular utilitarian social welfare function, the problem faced by a central planner can be broken down into two subproblems: a standard problem o f optimally allocating aggregate consumption over time and a problem of distributing aggregate consumption optimally at each moment among those alive. If it can use a sufficiently rich set of lump-sum taxes and transfers, the government can replicate the command optimum as a market equilibrium outcome. No issue of government debt is needed to achieve this decentralization. Copyright 1988 by The Econometric Society.
In this paper, we make two contributions to the literature on aggregating inputs and outputs in economy production functions. First, we present necessary and sufficient conditions for aggregating efficiently allocated goods under general assumptions on the technology. Second, we present a general theorem on the conditions for the existence of aggregates of both efficiently allocated goods and arbitrarily allocated goods. We use this theorem to elucidate the role of efficiency in determining the existence of aggregates.