Knowledge that Transforms

Though not conceived as a constant, the natural unemployment rate was taken to be invariant to supply shocks until the late seventies and to real demand shocks until now. The largely micro-theoretic model here is one in a series deriving the natural rate path from general equilibrium. In this model the labor market exhibits generalized real-wage rigidity, resulting from the use of "incentive wages" to combat shirking, and the asset backing shares is the firms' customers, arising from customer-market friction. One finding is that increased consumer demand drives up the natural rate by driving real interest rates up.

Starting from a micro model of consumer behavior under rationing by queuing that utilizes Gary Becker's "Allocation of Time" framework, we develop a simple macroeconomic model of a socialist economy. The "length of the queue" is the key endogenous variable that equilibrates aggregate supply and aggregate demand. Comparative statics analysis shows that an increase in wages over money prices brings about longer queues that reduce labor supply, output, and welfare. When shortages grow beyond a certain critical level, queues fail to sustain aggregate equilibrium in the economy.

Journal Article Two-Period Financial Contracts with Private Information and Costly State Verification Get access David C. Webb David C. Webb London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 107, Issue 3, August 1992, Pages 1113–1123, https://doi.org/10.2307/2118378 Published: 01 August 1992

This paper analyzes empirically for the years 1980-1988 the factors that led states with state income taxes to run tax amnesty programs. We find that the potential yield from an amnesty is more important than the fiscal status of a state. Furthermore, we estimate that if the 1RS audit rate had remained constant during the 1980–1988 period (instead of falling by almost one half), then the cumulative probability that an average state would have had a tax amnesty by 1988 would have fallen by just over 25 percent.

This paper details resource expenditures on nonexchange, noncharity transfer activity in the United States in 1985. Expenditures designed to facilitate and inhibit nonexchange transfers, executed privately or through the state, are reported. The numbers indicate that individuals plausibly invested nearly a trillion dollars in transfer activity that year. Nominal GNP in 1985 was just over $4 trillion, which includes numerous transfer-related resource investments that arguably should be subtracted out. Transfer activity thus apparently constitutes a much larger fraction of all economic activity conducted in the United States than previously recognized.

Journal Article Dynamic Edgeworth-Bertrand Competition Get access Marc Dudey Marc Dudey Board of Governors of the Federal Reserve System and Rice University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 107, Issue 4, November 1992, Pages 1461–1477, https://doi.org/10.2307/2118397 Published: 01 November 1992

We show that there is a strong, positive correlation across countries and industries between the standard deviation of the seasonal component and the standard deviation of the nonseasonal component of aggregate variables. After documenting this stylized fact, we discuss possible explanations and develop a model that generates our empirical finding. The main feature of the model is that firms endogenously choose their degree of technological flexibility as a function of the amounts of seasonal and nonseasonal variation in demand. Although this model is intended to be illustrative, we find evidence supporting one of its key empirical implications.

Amihai Glazer, Henry McMillan; Pricing by the Firm Under Regulatory Threat*, The Quarterly Journal of Economics, Volume 107, Issue 3, 1 August 1992, Pages 1089–

This paper examines the relative importance of transfers from workers to shareholders in the firm's decision to terminate their overfunded defined benefit pension plans. In contrast to earlier studies, I find evidence that firms terminate their pension plans to relieve themselves of implicit promises to workers of future compensation. In addition, financing and tax considerations influence the reversion decision. The results suggest that the 1986 excise tax on asset reversions reduced termination for reversion by 36 percent in 1986. In 1980 A & P terminated its overfunded pension plan. A & P said it intended to use the excess assets for corporate purposes. The reversion was challenged, but a court decision confirmed a firm's right to terminate its overfunded pension plans. Few plans were terminated for reversion before 1980. The number of terminations for reversion grew dramatically during the early eighties, peaking at 580 in 1985. The number of workers involved in pension reversions has grown from 22,000 in 1980 to just under 700,000 by

There is now a large literature that attributes the investment decline in heavily indebted countries to the effects of the international debt crisis which began in 1982. However, these countries also faced falling export prices and high world real interest rates in the early 1980s, and these shocks could have directly caused investment to decline. One way to test for debt effects is to see whether equations without any debt-related information can nevertheless forecast the investment declines that these countries experienced. This paper shows that such equations can forecast investment in many indebted countries, and thus casts doubt on many debt-related explanations for the investment declines. I.