Knowledge that Transforms

The hedonic approach has been proposed and used as a method to obtain quality-adjusted (hedonic) price indexes for the durable goods. The previous hedonic studies did not seem to pay careful attention to the economic factors which determine the functional forms of hedonic regression equations. This paper tries to analyze those factors for the U.S. boilers and the turbogenerators purchased by the U.S. steam electric power industry. This goal amounts to analyzing the production technologies of the industries producing these products under the maintained hypothesis of markup pricing. After analyzing them, we obtain the hedonic price indexes.

A method for evaluating publicly subsidized housing is presented and applied to New York City's Mitchell-Lama middle-income housing program. Households occupying the 57,000 subsidized dwelling units received net benefits of 25.6 million, or 450 per household, in 1968. The public subsidy required to provide these benefits was 46.9 million, or 824 per unit. Hence, rather substantial nontenant benefits of 21.3 million, or 374 per unit, would have had to be generated by the program for it to be considered an efficient use of resources. Net benefits to participants were found to rise with age of household head and family size, to be lower for female-headed households, and to show little relation to income level. However, net benefits varied considerably for otherwise similar households. Finally, program participants were found to differ little on average from those occupying private, unsubsidized rental housing in New York City in 1968.

The ultimate concern of this paper is educational adaptation, that process by which the educational composition of the adult population is modified in response to changes in technology and economy. Focusing on the changing role of the college educated, the first section descriptively examines the inter- and intrasectoral components of change in educational composition of the labor force, 1929-69, and explicates the destabilizing consequences of demographic movements. The second section develops a more aggregative representation of the demand side of the labor market, utilizing a CES technology relating educated and uneducated labor and incorporating differential rates of factor augmenting technical progress, and conjoins this with an explicit model of the determinants of the educational composition of the adult population. In the context of future demographic movements, the model is employed in the third section to project a 33 percent decline in college enrollments between 1970 and 2000. The final section then places the simulated educational adaptation process in its larger social-demographic context.

Although welfare change measurements based on consumers' surplus concepts are widely employed in empirical studies, economists have been unable to achieve a satisfactory professional consensus on the theoretical basis, the role of approximations, and the appropriate scope and interpretation of such measurements. This paper attempts to provide a reasonably precise and comprehensive statement of the central ideas, techniques, and formulas that underlie current welfare change measurement. Traditional consumers' surplus techniques are replaced by the expenditures function, since the latter provides a rigorous theoretical resolution to defects of consumers' surplus in analyzing income effects. The paper also attempts to clarify several issues in dealing with simple intertemporal comparisons.

Postwar experience has confirmed the central importance of domestic savings rates for capital accumulation and other goals in developing countries. Consequently, both for analytical and for policy purposes, it would be helpful to estimate savings functions which are grounded in economic theory and whose parameters are properly identified and free from simultaneous-equations bias. Accordingly, we have formulated a simultaneous-equations model of aggregate saving in developing countries and estimated its parameters with time-series data for five countries (Brazil, Costa Rica, Israel, the Philippines, and Taiwan). On the basis of the parameter estimates, steady-state savings ratios should rise significantly if these countries experience higher rates of income growth. However, for reasons we discuss, an upward movement in savings rates did not occur in these countries over the sample period.

A reduced-form equation relating length of "formal schooling" to market, endowment, and ability parameters was derived for a life-cycle human capital accumulation model with alternative assumptions: (a) equal borrowing and lending rates and (b) no loans for human capital investment. Length of "formal schooling" increases when loans are unavailable. For both cases, length of "formal schooling" varies directly with length of work life, a Hicks-neutral "ability" index, and the ratio of the human capital rental rate to the price of associated inputs, and varies inversely with the discount rate, deterioration rate, and initial human capital stock.