Jerry A. Hausman, David A. Wise, A Conditional Probit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences, Econometrica, Vol. 46, No. 2 (Mar., 1978), pp. 403-426

Using the result that under the null hypothesis of no misspecification an asymptotically efficient estimator must have zero asymptotic covariance with its difference from a consistent but asymptotically inefficient estimator, specification tests are devised for a number of model specifications in econometrics. Local power is calculated for small departures from the null hypothesis. An instrumental variable test as well as tests for a time series cross section model and the simultaneous equation model are presented. An empirical model provides evidence that unobserved individual factors are present which are not orthogonal to the included right-hand-side variable in a common econometric specification of an individual wage equation.

[We study the time consistency of optimal monetary policy in a framework akin to the one in [12, Ch. 1] but we assume away lump sum taxation--all taxes are distortionary. Our major result is that under perfect foresight (as defined in [8, 23]) optimal monetary policy is bound to be time inconsistent. The paper is closely related to the previous works of Auernheimer [2], and Kydland and Prescott [15].]

[The paper explores some of the issues involved in constructing measures of mobility when the data are provided in the form of a transition matrix. An initial set of axioms is proposed which is inconsistent. They can, however, be reconciled if empirically unlikely transition matrices are eliminated from consideration. The paper then discusses the problem of comparing matrices not defined over the same interval. An index based on the convergence speed in a Markvov chain process is able to compensate for differing time periods.]

Abs tract This paper proposes an econometric methodology to deal with life cycle earnings and mobility among discrete earnings classes. First, we use panel data on male log earnings to estimate an earnings function with permanent and serially correlated transitory components due to both measured and unmeasured variables. Assuming that the error components are normally distributed, we develop statements for the probability that an individual's earnings will fall into a particular but arbitrary time sequence of poverty states. Using these statements, we illustrate the implications of our earnings model for poverty dynamics and compare our approach to Markov chain models of income mobility. *Thls draft supersedes an earlier version of this paper which was

NUMEROUS STUDIES OF OPTIMAL MODELS in economic growth theory conducted with the aid of Pontryagin's maximum principle [3] led to important qualitive conclusions about the optimal development of economic systems over a finite or even infinite horizon (the latter is the more natural statement of the problem). At the same time almost all authors have been limited by consideration of production functions of only a narrow class, as a rule the class of concave functions. Concave production functions are known to be a good approximation of economic reality when the economy is in a high state of economic development (for instance, when the ratio of capital K to labor force L is great). However, accurate analysis of growth in certain less developed countries leads one to the conclusion that economic description by a concave function is not always applicable and that it is necessary to expand the class of production functions under consideration for a more adequate description of an economic system. Of special interest in this respect are functions which possess increasing returns to scale at an early stage of economic development and diminishing returns at a later stage. In turn, introduction of such functions generates a number of difficulties of a mathematical character (for example, Mangasarian's theorem on the sufficiency of the Pontryagin's conditions is not valid in this case). At present we do not know works where this problem has been studied definitively even in the one-dimensional case. Meanwhile, in our opinion, it is of considerable interest. In the present paper we consider a one-sector dynamic model of an economy with a convex-concave production function. The study is based on application of a maximum principle in Arrow's form [1] which is extremely useful for the analysis of the economic processes, since it allows taking phase constraints into consideration. Arrow's proposition has not been strictly proved; however, to my knowledge, there does not exist any contradictory examples.

[It is demonstrated that, under regularity assumptions on individuals' preferences, for an open dense set of exchange economies indexed by initial endowments, the core does not possess the equal treatment property. The assumptions made on individuals' preferences are subsequently shown to characterize an open dense subject of the space of preferences.]

[Using cross-sectional agricultural household accounting record data for 1967 and 1968, a linear logarithmic expenditure system, consisting of three commodities--leisure, agricultural commodities, and nonagricultural commodities--is estimated for the Province of Taiwan. The hypothesis of utility maximization, as well as other hypotheses on functional form, are tested. It is found that the empirical evidence is consistent with utility maximization and that household labor supply depends on both the composition and the size of the household as well as the wage rate and prices. The consumption demand, labor supply, and marketed surplus elasticities with espect to prices, income, household composition, and household endowment variables are also reported.]