Knowledge that Transforms

Irish Committee for Social Science Research

-This paper proposes a modified version of Durbin's h-statistic for testing residual correlation in a dynamic regression model. Finite sample properties of the new statistic, Durbin's h-statistic and Sargan's modified version of h are investigated by simulation.

This paper represents part of a larger ongoing project to build and use a numerical general equilibrium model of the U.S. tax system. Charles Ballard,

This paper examines the shift in the relation between the inflation rate and the rate of growth of real output which has occurred in the United States over the past three decades, and attempts to assess the relative importance of three possible lines of explanation: a) the new classical view of the output-inflation tradeoff, initially specified by Lucas; b) the effect of supply-side shocks, such as energy prices; c) the effect of inflation variability on the natural rate of real output, as hypothesized by Milton Friedman. The paper concludes that b) and c) seem to have played a significant role in the observed shift from a positive to a negative correlation between the rate of inflation and the rate of real output growth, but that a) did not.

The variance bounds tests of the present value model of stock prices are re-examined in this paper.A direct test of the model based on ordinary least squares estimation of a simple regression equation is proposed as an alternative and it is shown that this regression approach has several advantages over the variance bounds tests.This test is easily adapted to the important case in which the percentage changes in real dividends and real stock prices are stationary pro- cesses.The t*ests are applied to quarterly data for the Standard & Poor's Index of 500 Common Stocks and tJie results are much more > conclusive than those obtained by previous tests.

Considerable debate has raged over the economic assumption that the large corporation, through the decisions of its managers, attempts to maximize its profits. Closely related to the notion of profit maximization is expense behavior of managers which would indicate a preference for expenses over firm profit. This study examines the market structure effects on expense behavior and, for the first time, tests are made using data which unambiguously reflect market structure differences between firms in the sample. The results provide evidence that is contrary to the expense hypothesis. 1E~ CONOMISTS have long been interested in managerial motivation. As Ciscel and Carroll ((1980); Carroll and Ciscel (1982)) recently explain, considerable debate has raged over the economic assumption that the large corporation, through the decisions of its managers, attempts to maximize its profits. Closely related to the notion of profit maximization is expense behavior of managers which would indicate a preference for expenses over firm profits. The tension between profit maximization behavior and expense behavior of managers has been discussed by Larner (1970). One condition which could affect a firm's ability and willingness to engage in expense behavior is the market structure in which it operates. This study examines the market structure effects on expense behavior and, for the first time, tests are made using data which unambiguously reflect market structure differences. The results provide evidence contrary to the expense hypothesis and the findings are quite consistent with the previous research of Ciscel and Carroll (1980), Larner (1970), Rhoades (1980), and Glassman and Rhoades (1980).

According to unpublished data compiled by BLS, productivity in the construction industry reached a peak in 1968 and, except for a brief and small upturn between 1974 and 1976, has been falling ever since. This paper examines the sources of this productivity decline between 1968 and 1978 by estimating a production function to assign weights to various factors responsible for productivity change and deriving a new price deflator for construction which does not rely on labor or material cost indexes, thus eliminating a systematic bias toward overstating the rate of growth of prices.

Orley Ashenfelter, David Card, Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs, The Review of Economics and Statistics, Vol. 67, No. 4 (Nov., 1985), pp. 648-660