Knowledge that Transforms

In a privatization competition, private contractors bid against an in-house team to perform a governmental function that is currently performed by the in-house team. The Department of Defense initiated 3,500 privatization competitions from 1978 to 1994, generating estimated annual savings of $1.46 billion. We estimate a reduced-form model of the savings from these competitions that takes into account the premature cancellation of some competitions and the censoring of the in-house bid at current cost. The Department of Defense maintains a list of candidates for future privatization competitions. Using our model, we forecast annual savings of $5.74 billion if privatization competitions were completed for all functions on this list.

November 01 2001 A Comment on James M. Poterba's ‘Demographic Structure and Asset Returns’ John Y. Campbell John Y. Campbell Harvard University Search for other works by this author on: This Site Google Scholar Author and Article Information John Y. Campbell Harvard University Received: June 12 2001 Accepted: June 12 2001 Online ISSN: 1530-9142 Print ISSN: 0034-6535 © 2001 President and Fellows of Harvard College and the Massachusetts Institute of Technology2001 The Review of Economics and Statistics (2001) 83 (4): 585–588. https://doi.org/10.1162/003465301753237669 Article history Received: June 12 2001 Accepted: June 12 2001 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn Email Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation John Y. Campbell; A Comment on James M. Poterba's ‘Demographic Structure and Asset Returns’. The Review of Economics and Statistics 2001; 83 (4): 585–588. doi: https://doi.org/10.1162/003465301753237669 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsThe Review of Economics and Statistics Search Advanced Search This content is only available as a PDF. © 2001 President and Fellows of Harvard College and the Massachusetts Institute of Technology2001 Article PDF first page preview Close Modal You do not currently have access to this content.

We estimate models of workers compensation claim duration for a sample of Canadian workers with serious low-back injuries. The models extend recent duration research by allowing worker characteristics to affect duration dependence through the nonlocation parameters of the duration distribution. We compare results for modified Weibull models and piecewise-constant hazard rate models of duration dependence. The results show that workers' responses to elapsed claim duration vary significantly with their characteristics and with economic incentives to return to work. Further, allowing for heterogeneity in duration dependence effects can dramatically change the coefficient estimates of the variables that determine the location parameter of the duration distribution.

There appear to be no anomalies in the aftermarket of a sample of 4,848 U.S. IPOs over the period 1975 to 1995, except issues offered below $6. Risk is priced in the aftermarket in accordance with Rubin-stein's asset-pricing model. Unlike under the efficient markets hypothesis (EMH), however, market priors about the probability of future default are not unbiased at the IPO date. Still, subsequent learning is rational: the market uses Bayes' law with a correct-likelihood function (of news given the eventual fate of an issue). That is, the hypothesis of an efficiently learning market (ELM) cannot be rejected. We produce direct evidence in support of these statements, based on a new class of tests. We also provide indirect evidence, by documenting a gradual convergence of IPO prices towards EMH as issues mature.

This paper develops a discrete variant of the semiparametric methodology of DiNardo, Fortin, and Lemieux (1996) (DFL) to measure the effects of socio-economic variables on the income distribution. Although the proposed method is also based on the calculation of hypothetical income distributions by reweighting the original population, it is much easier to implement. The framework is applied to examine the distributional effects of rising unemployment, decreasing female labor market participation, and widening income structure in East Germany following the reunification with West Germany in 1990. The empirical results suggest that both these tendencies contributed considerably to the recent increase in income inequality in East Germany.

Using data from a unique nationally representative sample of businesses, we examine the impact of workplace practices, information technology, and human capital investments on productivity. We estimate an augmented Cobb-Douglas production function with both cross section and panel data covering the period of 1987–1993, using both within and GMM estimators. We find that it is not whether an employer adopts a particular work practice but rather how that work practice is actually implemented within the establishment that is associated with higher productivity. Unionized establishments that have adopted human resource practices that promote joint decision making coupled with incentive-based compensation have higher productivity than other similar nonunion plants, whereas unionized businesses that maintain more traditional labor management relations have lower productivity. Finally, plant productivity is higher in businesses with more-educated workers or greater computer usage by nonmanagerial employees.

We test whether smooth industry-level investment dynamics result from explicit aggregation of asynchronous and possibly lumpy firm-level investment. We compare the deviations of optimal from actual firm behavior across industries categorized by their ratios of idiosyncratic uncertainty to the sum of idiosyncratic and aggregate uncertainty. The deviations are represented by the residuals of a cointegrating regression that is derived from the firm's first-order condition under no adjustment costs. In support of models with asynchronous firm decisions, we find a significant negative relationship across industries between idiosyncratic uncertainty and the persistence of these residuals.

Tax compliance studies usually focus on the effect of enforce-ment spending on tax evasion. Reliable estimates are difficult to obtain because evasion data are often suspect. This note shows how tax revenues can be used instead of evasion data to estimate the impact of changes in enforcement spending. Applying our method to Chilean data, we find that $1 (USD) of additional enforcement spending increases VAT revenues by $31. Moreover, current levels of spending could increase by 40% and still be within sample values. Hence, a 10% increase in spending could reduce evasion from its current rate of 23% to 20%.

We examine capital adjustment patterns using two large and largely novel plant-level data sets from the manufacturing sectors of Colombia and Mexico. The data suggest that irreversibilities play a more important role than in more-advanced economies. However, we do not find support for the presence of increasing returns in the adjustment cost technology, such as arising from fixed costs. Firms go through periods of inaction and rarely sell capital, but they do not invest at discrete times only. An examination of the dynamic patterns of adjustment of factors differing in their flexibility supports this interpretation. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology