Knowledge that Transforms

Hans van Ophem (1993) employed a switching regression model with earnings entering the choice equation to investigate earnings differentials between the public and private sectors. Ophem also described a 'modified switching regression model' in which only the equation for unknown earnings is substituted into the choice equation. He argued that the coefficients in the choice equation can be identified in the modified switching regression model without exclusion restrictions and that estimates from the modified switching regression model are more efficient than estimates from the standard switching regression model. The authors show that there are flaws in Ophem's analysis which invalidate his claims.

This paper explores the usage of various industrial policy tools in Japan. Contrary to the conventional wisdom, the authors find that a disproportionate amount of Japanese targeting occurred in low-growth sectors and sectors with decreasing returns to scale. In addition, they find no evidence that productivity was enhanced as a result of industrial policy measures.

The study presented here uses data from the NORC General Social Surveys to explore the effects of measurable school characteristics on student achievement. What separates this study from many others is the use of aggregate data on older cohorts, usually associated with research on the influence of school inputs on earnings. Earnings studies have tended to find substantial effects, while much of the research on achievement using contemporary, cross-sectional data has not. We find substantively large effects, similar in size to those found in many earnings-focused studies. In this way, our results point to the importance of aggregation and cohort effects in modeling the relationship between school inputs and student outcomes. The level of data aggregation, in particular, appears important, bringing into question causal interpretations of the results of studies using aggregate data to assess school input effects.

We consider a Bayesian implementation of a new approach to estimating Demand Systems. This approach, suggested by Varian (1990), is based on a generalization of Afriat's (1967) e-ciency index. The model we propose leads to a very tractable posterior and predictive analysis, yet allows for interesting economic interpretations. We conduct a sensitivity analysis with respect to the prior in an application to annual aggregate U.S. consumption data, and conclude that the sample is quite informative. Average e-ciency and expected budget shares are examined in some detail.

Empirical evaluation of the effect of school quality, or type and amount of resources per student, on adult earnings requires a conceptual framework. A model of the returns to schooling in a simple human capital growth context is extended to illustrate how factors such as consumption benefits of students, parental concern over equity between siblings, and use of schools to facilitate parental labor supply can alter the apparent return to school quality. The need for microlevel time diary and other data on human capital formation in both classrooms and families is highlighted.

This paper develops a model of disarmament by incorporating rationing theory into the economic theory of alliance. In order to provide an econometric measure of welfare gain from a disarmament treaty, the author employs the cost functions predicated on rationed and unrationed demand systems. By combining the economic theory of foreign aid with that of alliance, the author examines the impact of disarmament on the developed economies' foreign aid to developing countries as a peace dividend. The model is applied to the case of the U.S. economy under mutual disarmament between NATO and the Warsaw pact.

Serena Ng, Huntley Schaller, The Risky Spread, Investment, and Monetary Policy Transmission: Evidence on the Role of Asymmetric Information, The Review of Economics and Statistics, Vol. 78, No. 3 (Aug., 1996), pp. 375-383

The literature which examines the impact of school spending on students' subsequent earnings is bifurcated into state-level studies, which typically find strong effects, and school-level studies,which find little effect. Since most of the school-level studies examine young workers, one explanation for the discrepancy is that school inputs benefit workers only as they gain job experience. The paper tests the hypothesis by using both school-level (NLSY) and state-level data sources (Census and the Biennial Survey of Education). Both data-sets suggest that there is typically no significant age dependence. Thus other explanations of the discrepancy are likely to explain the differing results. JEL Codes: I21, I24 1 1. Introduction Education is arguably one of the best long term public investments available to a society. It is widely accepted that the private returns to an additional year of education are quite high, and that the social returns are also high. Such beliefs form the basis ...

John Mutti, Bernard Yeung, Section 337 and the Protection of Intellectual Property in the United States: The Complainants and the Impact, The Review of Economics and Statistics, Vol. 78, No. 3 (Aug., 1996), pp. 510-520