Knowledge that Transforms

David J. Stockton, Charles S. Struckmeyer, Tests of the Specification and Predictive Accuracy of Nonnested Models of Inflation, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 275-283

Policy makers are showing increasing interest in employment and training programs as a means of reducing welfare costs, despite the evidence that welfare costs are reduced little by these programs. This paper examines the potential for increasing the welfare savings associated with such programs by targeting women for whom the attendant welfare reductions are likely to be the largest. It reanalyzes data from five programs and computes welfare impacts as if the programs had been selectively offered. The results suggest that targeting job-search assistance programs is not likely to be effective, but taht there is a potential for improving the effectiveness of subsidized employment and training programs.

This study involves an empirical analysis of the effect of social security wealth on wealth accumulation. My analysis takes as its point of departure a study by Feldstein and Pellechio on this subject. Their study used the same data source as analysed in this paper. Feldstein and Pellechio found strong support for the notion that increases in social security wealth caused families to reduce their wealth accumulation. My resuts indicate the strong conclusions reached by Feldstein and Pellechio are not robust. In particular, first, when I excluded a group, of farmers from our sample increases in social security wealth did not result in families reducing their wealth accumulation. Second, Feldstein and Pellechio calculated social security wealth using income measures from a single year. When I applied their methodlogy to income measures from a different year results were markedly affected.

James E. Vestal, Evidence on the Determinants and Factor Content Characteristics of Japanese Technology Trade 1977-1981, The Review of Economics and Statistics, Vol. 71, No. 4 (Nov., 1989), pp. 565-571

This paper presents and estimates a simple model of real exchange rate determination that includes the expected future U.S. federal budget deficit as a determinant. The model is applied to the real value of the dollar versus the mark, yen, and pound over the period June 1974-October 1987. The estimates suggest that rapid increases in the expected future deficit in the early 1980s contributed to a rapid appreciation of the dollar. The fall in the value of the dollar in the spring of 1985 appears to be due to a fall in the expected budget deficit.

A test of the hypothesis that estimates of the interest elasticity of personal and private saving may be biased downward by a failure to control for behavior related to defined benefit pension programs fails to reject existence of a positive interest elasticity of private saving. Correcting for pension funding bias, the estimated interest elasticity of private saving is 0.04, well below Michael J. Boskin's (1978) estimate of 0.4 obtained with a different data set and different estimation procedures. The estimated interest elasticity of personal saving is 0.28.

The earnings of married women have a more equalizing effect on the distribution of lifetime family earnings (or the expected present value of earnings) than on the distribution of annual family earnings, using Panel Study of Income Dynamics longitudinal data. The intertemporal variability of wives' labor supply causes the correlation between the lifetime earnings of husbands and wives to weaken relative to the correlation between their annual incomes, resulting in lower lifetime inequality. The inequality of potential income (full employment earnings) is found to be much greater for lifetime earnings than average annual earnings, based on alternative endogenous wage-hours models.