Knowledge that Transforms

The U. S. economy is found to be sufficiently open to make the balance on foreign transactions an essential part of the equilibration process between saving and investment. Specifically, over the past two decades, changes in the national saving rate have increasingly been matched by changes in net foreign rather than domestic investment. Thus, it would be counterfactual to assume in policy discussions that measures to raise the national saving rate add fully to the stock of productive capital in the United States, barring only Keynesian complications. Conversely, a stimulus to domestic investment could be validated in part by drawing on foreign saving.

The principal finding of this paper is that the conventional pricing solution for the peak load pricing problem must be modified to be applicable to a joint facility that is utilized by heterogeneous groups of users. The paper indicates how extending the conventional model through a multidimensional approach to capacity, accounting for its physical dimensions as well as its time dimension, will require specific capacity charges to users independent of the time of consumption. Any additional congestion charges levied will not perform the conventional role of covering replacement capacity costs, but will be used to reduce current congestion costs.

Journal Article An Alternative Theory of Exchange Rate Dynamics Get access Jagdeep S. Bhandari Jagdeep S. Bhandari George Mason University and Southern Illinois University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 2, May 1983, Pages 337–348, https://doi.org/10.2307/1885630 Published: 01 May 1983

In this paper we address the question of whether a price-setting monopolist can improve his welfare by imposing quantity constraints on buyers. We show first that if all buyers are identical, quantity rations are not useful for the monopolist. We then show by means of an example that if buyers are diverse, quantity rations may be desirable. It is shown that if there are only two commodities, the only constraint that may be useful to the monopolist is a zero constraint on one of the two commodities. An example shows that this property does not hold for more than two commodities.

The model investigated here is an adaptation of the free-entry model introduced in Kihlstrom-Laffont [1979]. In that model the only labor market is one in which employers pay workers an ex ante guaranteed wage. In the model of this paper, there is also a spot market for labor. In the earlier sections of the paper, the existence of the equilibrium is established, and its efficiency is investigated. In this analysis it is assumed that all individuals are identical. In the later sections we drop this assumption and investigate conditions under which employers are more risk-averse than workers.

An estimator of inequality in lifetime incomes is derived. It can be computed for a population from the distribution of incomes in one year. As a result, the estimates are as easily calculated as measurements of annual inequality, but can be used as measurements of lifetime inequality. Estimates from this measure and two others have been computed for selected years since 1947. The results are compared by their implications for the level and trend of inequality in the United States.

The paper presents a labor market equilibrium analysis of implicit contract theory. A two-period, single-good model is used to propose consistent notions of labor market equilibrium for long-term employment contracts both when labor is specialized and cannot move in the second period and when there is free mobility without costs. The result that long-term contracts emerge in equilibrium even without mobility costs is novel and contrary to common beliefs. The main features of equilibrium are that (risk-neutral) firms will insure (risk-averse) workers against downside risk, yielding downward rigid wages. Wages are not fully rigid (as in earlier work on contract theory) because workers may quit and wages have to be bid up to retain them. The firm gets its return of the insurance deal by paying less than marginal product in the first period. The resulting equilibrium is second best and lies between productive efficiency and full insurance. Workers gain from long-term contracts in comparison to spot markets; whereas owners may not. In the model with specialized skills there exist transfer payments such that both parties are better off within an equilibrium with long-term contracts.

This paper generalizes analysis of spatial pricing policies to cases in which oligopolists produce differentiated products. It is shown that spatial price discrimination through freight absorption is affected by the number of competitive firms, the extent to which their products are substitutes, and by the locations such firms adopt in the market. It is further shown, however, that spatial price discrimination may be the consequence of collusive agreements, or of attempts to anticipate competitors' actions. The simple (spaceless) foundations of current policies on spatial pricing need to be reexamined, but this reexamination must take into account interconnections between producers, the extent to which their products are differentiated, and their locations.

In the public sector, commodity bundling involves an agenda setter exercising control over a governmental unit's budgetary mix—the allocation of the unit's total budget to its various subactivities—in order to manipulate electoral outcomes on other fiscal variables such as the total budget. This paper develops an analytical model of a political market in which a multi-activity governmental unit practices commodity bundling in order to advance the interests of the setter. Two institutional structures are considered, each involving a different voting process or set of electoral constraints and, hence, a different form of commodity bundling. The paper explores the impact of this form of monopoly power on such policy outcomes as the governmental unit's total budget, its budgetary mix, and the distribution of net benefits from collective action.

Chau-nan Chen, Tien-wang Tsaur; Currency Substitution and Foreign Inflation*, The Quarterly Journal of Economics, Volume 98, Issue 1, 1 February 1983, Page