It is commonly felt that a financial market achieves informational efficiency as traders with the best information and the most skill make profits at the expense of those with inferior information or ability and come to dominate the market. This paper develops a model of a speculative market in which this redistribution of wealth among traders with different information and ability can be studied. In the short run the market tends toward increased efficiency, but in neither the short nor the long run is full efficiency likely. The average deviation from efficiency is shown to depend on traders' characteristics such as the quality and diversity of their information and their risk aversion

The earnings of foreign-born adult white men, as reported in the 1970 Census of Population, are analyzed through comparisons with the native born and among the foreign born by country of origin, years in the United States, and citizenship. Differences in the effects of schooling and postschool training are explored. Although immigrants initially earn less than the native born, their earnings rise more rapidly with U.S. labor market experience, and after 10 to 15 years their earnings equal, and then exceed, that of the native born. Earnings are unrelated to whether the foreign born are U.S. citizens.

This paper examines the joint determination of labor contract length and the degree of wage indexation in a neoclassical model modified to incorporate short-term wage rigidities and uncertainty, both real and monetary. A number of propositions are demonstrated. Optimal indexing may not insulate the real sector from unanticipated monetary shocks. For any given degree of indexing, contract length decreases with the level of uncertainty and increases with the cost of contracting. If indexing is costly, indexing provisions will appear only in longer contracts. The proportion of contracts indexed will increase with the variance of monetary disturbances. Finally, monetary variability may cause resource misallocation among industries. Some related policy implications are noted

In the cost-benefit analysis of commodity taxes or subsidies, distributional weights complicate the standard textbook "triangle analysis." Net benefits are maximized with optimal subsidies in some circumstances, optimal taxes in others. Demand and supply elasticities play important roles in determining these weighted-welfare effects of commodity taxation. I then explore how to use distributional weights (a) to analyze investment projects and (b) to determine an optimum income-tax structure. In all these applications, the use of distributional weights is shown to have very strong and (to many people) disquieting implications. A final section explores alternative "solutions" to these difficulties.

[Our tax system was designed for an economy with little or no inflation. The current paper shows that inflation causes capricious changes in the effective rate of tax on capital income and therefore in the real net rate of return that savers receive. This is not only a temporary disequilibrium effect but one which persists in steady-state equilibrium. Unlike earlier papers by Feldstein and by Green and Sheshinski, the current study recognizes that firms finance investment by both debt and equity in a ratio that depends on the tax rates and on the rate of inflation

This paper derives an econometrically meaningful test of the Tiebout hypothesis and demonstrates that previous tests are inappropriate. The implications generated by two closely related models of voter-determined local fiscal variables and individual resident housing choices are compared. We demonstrate that when the Tiebout mechanism operates without interference, housing quantity and location choices are Pareto efficient, while they are not when frictions interfere with its operation. We show that the appropriate test requires joint estimation of a set of structural equations determining housing purchases and locational choices utilizing data for both median and nonmedian voters across metropolitan area jurisdictions

[This paper shows that, because of capital accumulation effects, the estate tax may increase inequality of income and wealth. If the government takes actions to offset these accumulation effects, the tax will lead to an increase in equality of income and wealth. More generally, the paper argues that to evaluate the incidence of a tax in a growth context, one should compare policy changes which leave the aggregate capital labor ratio unchanged; we call this balanced growth incidence. But even with the capital labor ratio remaining unchanged, the estate tax may increase inequality in the distribution of consumption

Estimates of a rational expectations version of Friedman's time-series consumption model are obtained by imposing the pertinent restrictions across the stochastic processes for consumption and income. A likelihood ratio test is used to test the adequacy of three joint hypotheses: namely, Friedman's model, rational expectations, and some arbitrary conditions on the disturbance process in the consumption function. The paper treats both the cases in which income is econometrically exogenous with respect to consumption and those in which it is not. The macroeconomics of this exogeneity condition are briefly discussed

Analysis of longitudinal earning data indicates higher earnings growth for scientists of the same experience but more recent vintage. Theoretical justification for such a relation is suggested, and the implied biases in cross-section data are noted. Because of a basic identification problem, an alternative interpretation, time-experience interaction, is also considered. The general conclusion is that earning growth is not uniform or neutral. There is no simple mechanical method by which lifetime profiles can be inferred from single cross-section data.

The paper develops a natural measure of the amount of relative price variability. The variance of relative price change is shown to be correlated with the rate of change in the price level using data for consumer goods in both the Netherlands and the United States. This association has been noted in other data for a variety of countries. Using a multisectoral supply-and-demand framework, the paper goes on to show how changes in relative prices and ultimately the variance of relative price changes are related to supply conditions changes in real income and the amount of unanticipated inflation. The model is used as the basis for an analysis of movements in the prices of consumer goods in the United States for the period 1929-75. The amount of unanticipated inflation (measured as the difference between the actual rate and a time-series predictor) is a more important determinant of relative price variability than the rate of inflation