This paper attempts to integrate traditional models of invention and learning by doing, developing a model that emphasizes the interdependence between research activity in the laboratory and production experience on the factory floor. Learning depends on invention in that learning by doing is viewed as the exploration of the finite and bounded productive potential of invented technologies. At the same time, the profitability of costly invention is dependent on learning in that costs of production depend on cumulative learning experience.
This paper presents an empirical investigation of adverse selection in the wholesale used car market. New car dealers (who sell both new and used cars) differ from used car dealers (who sell only used cars) in the propensity to sell trade-ins on the wholesale market. Models of adverse selection suggest that the dealer type that sells a higher proportion of its trade-ins on the wholesale market will sell, on average, cars of higher quality and receive in return a higher price. A survey of dealers' wholesale behavior and prices collected at a wholesale auction are used to test this prediction. I find weak evidence for adverse selection.
It is widely believed that rent control leads to a decline in the quality of rental housing. This study examines the effect of rent control on the quality of rental housing in New York City. Quality change is linked to the suppression of rent below market levels and other characteristics of the housing unit. We develop a first-order nonstationary, heterogeneous Markov model that allows for true state dependence, observed heterogeneity, nonparametric unobserved heterogeneity, and a mover-stayer structure. The results offer some support for the belief that rent control leads to a deterioration in housing quality but suggest the need for additional investigation of this issue.
Many households in developing countries rely on seasonal agriculture for their incomes. This paper investigates whether household consumption expenditure tracks income across seasons. Using data from Thailand, I contrast the seasonal consumption patterns of households with different seasonal income patterns and estimate the responsiveness of seasonal consumption to seasonal income. I find little evidence that consumption tracks income over the course of the year. The findings suggest that observed seasonal consumption patterns are the result of seasonal variations in preferences or prices, common to all households, rather than an inability of households to use savings behavior to smooth consumption.
This study finds a significant negative effect of proportional income taxation on human capital. Of the few earlier studies to address this issue, most suggested a negligible effect of taxation on investment in human capital. This earlier conclusion is shown to be incorrect by using a model that is more general in several respects than the models used previously.
Official measures of poverty in the United States are compiled by the Bureau of the Census by comparing a household's income level to a prespecified threshold. From a theoretical perspective it is more appropriate to evaluate the level of poverty using a consumption-based measure of household welfare. In this paper I evaluate the level of poverty using expenditure data from the Consumer Expenditure Survey. I find that consumption-based poverty rates are much lower than those based on income. The trend in the poverty rate in the United States is sensitive to the price index and equivalence scales used to adjust the poverty thresholds.
We investigate whether omitted family background variables are responsible for high returns to schooling estimated in Brazil. Returns to schooling fall by about one-third when parental schooling is added to wage equations. Surprisingly, the schooling of fathers-in-law has larger effects on wages than the schooling of fathers. On the basis of a model of assortative mating, we interpret this as evidence that parental characteristics represent unobservable worker attributes rather than nepotism in the labor market. We conclude that the "family background bias" in returns to schooling is modest and need not imply returns to family connections.
Dowries in South Asia have steadily risen over the last 40 years and now often amount to over 50 percent of a household's assets. This paper attempts to investigate the reasons behind this increase. It adapts Rosen's implicit market model to the Indian marriage market and tests predictions from the model with data from six villages in South Central India and from the Indian census. It is found that a "marriage squeeze" caused by population growth, resulting in larger younger cohorts and hence a surplus of women in the marriage market, has played a significant role in the rise in dowries.