T HE effects of schooling (as measured both by years attained and by one or more dimensions of quality), and socio-economic background in determining individuals' earnings, have long been controversial issues. In the past decade, with the advent of large scale empirical studies, a number of widely held but not well documented hypotheses about these issues have failed to find broad support in the data. Namely (a) several recent studies, most notably that by Coleman and his associates (1966), have found only a most tenuous relationship between conventional measures of the quality of school inputs and various achievement test scores and (b) the notion that socio-economic background is important in determining an individual's income has been played down in the literature concurrent with the rise in popularity of the human capital explanation of earnings differences (for example, Mincer (1970)). The purpose of this paper is to re-examine the relationship among income, socio-economic background, years of schooling and quality of school inputs. Several models are postulated which permit the examination of both the direct and the indirect effects of the various factors, separately for blacks and for whites. The primary data source is the 1968 Urban Problems Survey conducted by the Survey Research Center. The principal conclusions of this paper are: (a) school quality has a small direct effect on the wage rates of blacks but no apparent effect at all on the wages of whites; (b) for both races school quality has strong indirect effects as it influences the number of years of schooling attained; (c) socio-economic background, as variously measured, appears to have significant direct effects on earnings and, like school quality, indirect effects as it also influences the number of years of education attained; and (d) years of schooling appears to exert a strong influence on earnings independent of other measured variables, especially for whites.

T DEALLY, to determine the extent to which persons of a particular income group spend an increment to income, time series data on consumption and disposable income for individual households (panel data) are needed. Unfortunately, such data are not available. Available are time series aggregate data, which do not allow one to determine differential marginal propensities to consume for different income groups, and cross section data which do not allow one to trace over time the effects of changes in income on consumption. However, by utilizing both time series and cross section data, the hypothesis that the marginal propensity to consume decreases as income increases can be tested.

where S2 is the usual unbiased estimator of (X2. This procedure in effect defines a new composite estimator which is a probabilistic mixture of bi and b1* and which has corresponding performance characteristics: its MSE is a weighted average (for given parameter values) of MSE bi and MSE bl*, the weights being given by the probabilities that inequality (13) will or will not be realized. We do not wish to suggest that time and effort be devoted to consideration of principal component estimators in every regression study. Benefits in terms of MSE reduction will often be nonexistent or outweighed by the additional computational costs. But in cases such that (i) data augmentation is impossible or very costly, (ii) multicollinearity is severe, and (iii) there exists a well-defined estimation objective, the principal component procedure appears to offer one route for improving upon conventional estimation techniques. FIGURE 1. BREAK-EVEN CORRELATION VALUES r 9

T HIS paper presents an econometric analysis of the behavior of wages and prices in the American steel industry and the experience with steel imports during the 1950's and 1960's. The results presented are a portion of a larger, and as yet unfinished, effort to explain profit in the steel industry by estimating an equation for each economically meaningful component of the industry's income statement and then combining the equations to form a complete system. Modern empirical investigation of the determinants of wages, prices, and imports has developed in two distinct contexts. First, in response to widespread public concern over rising wages and prices during the 1950's, economists derived and tested a series of new formal models (generally embodied in a single central regression equation) to describe the processes at work. As time has passed more models have been proposed, early formulations have been elaborated and extended, and more data have become available for testing. In general, however, these models have stayed at the economywide level, and little has been done to disaggregate them by industry classification. Second, the wage-price subsections of large macro-econometric models have attempted to provide a complete explanation of the inflationary process, but as with the single equation studies, there has been little analysis of the mechanism in any individual sector. This paper draws upon the theories and models which have been developed for economy-wide studies, modifies them where necessary, and applies them to the steel industry. The next three sections present the formulation and estimation of equations for the steel wage rate, the wholesale price index for steel, and the ratio of imports to domestic shipments. Then, with the aid of the estimated relationships, some short-run projections are made; finally, the analysis is summarized.

T HIS paper is concerned with the effect of schooling and learning on the level of workers' earnings. Individual data obtained from the 1/1000 sample of the 1960 United States Census for the North Central region 1 and information on scholastic achievement obtained from Equality of Educational Opportunity,2 popularly known as the Coleman Report, are used to measure the effect of educational achievement and various other personal characteristics on the earnings of those with twelve or fewer years of schooling. The first section discusses the data and the specification of earnings functions. In the next section it is shown that, for whites, a significant relationship exists between an individual's scholastic achievement and his earnings and that achievement explains more of the variance in earnings than does the number of years in school. The third section presents findings that the effect of education on earnings is less for blacks than for whites and that the black's lower average achievement does not account for the difference in the mean earnings of blacks and whites. The fourth section describes a recursive model of income determination.

I NTERNATIONAL comparison of trade barriers has always been complicated by the problem that the barriers take different, and not easily comparable forms: tariffs, exchange controls, differential sales taxes on domestic and imported products, explicit commodity quotas, implicit or hidden quotas (in the cases of western state trading and all of the trade conducted by the communist nations), and so forth. In 1958 a distinguished panel of experts headed by Gottfried Haberler [4] suggested that the degree of protection can be very roughly judged by the extent to which the price paid to the producer exceeds the world price for importers. . They were well aware of many of the difficulties of this method such as the effect on both domestic and world prices of the goods in question of subsidies given to both exporters and domestic producers. The United Nations Economic Commission for Europe used this technique in 1960 [ 12 ] to study agricultural protection in Western Europe. They also were aware of many of the statistical and methodological pitfalls of this technique and, in particular, called attention to the problems raised by the existence of disequilibrium exchange rates and the levy of tariffs on commodities requiring differential amounts of fabrication in the importer. Several other workers have also found the Gatt approach convenient, e.g., Dardis and Pryor [4, 8]. Pryor, interested in comparing the trade barriers by Eastern and Western Europe, respectively, to the exports of underdeveloped nations as a result of discussions which grew out of UNCTAD I. innovated by adjusting the ratios of domestic to world prices for the fact that the price levels of some nations are biased upward by a relatively large reliance on sales as opposed to income taxation. I point out in this paper two major difficulties with the use of the ratio of domestic to world (or import) price as a proper and unambiguous measure of barrier to imports. The first has to do with problems of defining barrier in view of the several different price ratio-quantity relationships which are possible under differing circumstances and assumptions. Second, the implications for this method of disequilibrium prices and repressed inflation are explored. This is particularly relevant for comparisons involving the Union of Soviet Socialist Republics and Eastern Europe [7] since the economies of these nations have consistently experienced repressed inflation. However, it is also relevant to comparisons which would have included Western Europe after World War II and some of the underdeveloped nations at present.

Thompson's model preserves the existence of many firms producing the collective good by having all firms act under the Cournot-Bertrand convention and by discriminating in price among consumers. This use of the Cournot assumption is clearly at variance with the prior assumption by Thompson that there is perfect knowledge of all market-relevant information . peculiar results of the Thompson model rely on perfect knowledge by producers of consumers' preferences, and upon perfect knowledge by consumers of the intentions of producers to discriminate in price. But perfect knowledge of all market-relevant information evidently excludes knowledge of the fact, by any producer, that he can have all the revenue of the industry at no additional cost simply by reducing his price (s) slightly. This is simply not compatible with perfect competition as usually understood, and has nothing to do with whether or not consumers have an incentive to compete against each other. A new entrant or an existing firm in Thompson's model who accidentally reduces his price will reap great rewards. This could not happen in a perfectly competitive equilibrium. If any firm in Thompson's model reduces its price, a destructive competitive price reduction spiral will ensue, reducing the price to equality with marginal cost, which is zero. This is what perfect competition is all about, and it is very different from the behavior of Thompson's producers, who do not, in fact, compete. Just as the nongovernment allocation of a good requires barriers to competition, price discrimination requires the same. There is nothing in the inherent nature of a good which provides these barriers. As a result, Thompson has to make special assumptions about the nature of competition to get his result. These assumptions are not consistent with perfect competition. I would have no quarrel with Thompson if he had titled his paper The Production of Collective Goods Under a Very Peculiar Kind of Non-Competitive Polipoly, and had deleted all further references to perfect competition. One might still argue, of course, that the model is then void of either practical or theoretical usefulness. On the practical side, I submit that each of the examples cited by Thompson of the (e.g., nongovernment) allocation of a good is a case in which there is either some barrier to competition, or in which some good has been substituted for the collective good. In broadcasting, for example, stations substitute the private good, audience size, for the public good, programming. They sell the good, not the one. No collective good can be privately and competitively produced. Nongovernmental allocation of such a good requires both exclusion devices and barriers to competition. Efficient allocation may require price discrimination.

the value of exports. The analysis is based on cross-sectional value and quantity series, and it is conceivable that the quantity data, from which our unit value series are constructed, contain a fair margin of errors. The reliability of unit values with respect to the aggregation problem is examined, and measurement errors in the quantity series may have biased our estimates of elasticities towards minus one. Since it is often the case that the estimation of price elasticities in international trade has to rely on unit value series, we maintain that bias due to inaccurate quantity data should be taken seriously.