Previous tests for liquidity constraints using consumption Euler equations have frequently split the sample on the basis of wealth, arguing that low-wealth consumers are more likely to be constrained. We propose alternative tests using different and more direct information on borrowing constraints obtained from the 1983 Survey of Consumer Finances. In a first stage we estimate probabilities of being constrained, which are then utilized in a second sample, the Panel Study of Income Dynamics, to estimate switching regression models of the Euler equation. Our estimates indicate stronger excess sensitivity associated with the possibility of liquidity constraints than the sample splitting approach.

In this paper the authors have theoretically derived a net migration equation and estimated it using time-series data for 51 regions over the period 1971-88. The results indicate that the dynamic response of net migration is stable and is significantly related to stock equilibrium changes induced by amenity differentials, relative employment opportunities, relative real wages, and industry composition. Moreover, the explicit linkage of stock equilibrium to stable dynamic flows in the model ensures that any stock disequilibrium will generate a finite migration response sufficient to attain a new stock equilibrium. The estimated parameters determine the speed at which net migration re-establishes stock equilibrium. Coauthors are Dan S. Rickman, Gary L. Hunt, and Michael J. Greenwood.

Neil Bania, Randall W. Eberts, Michael S. Fogarty, Universities and the Startup of New Companies: Can We Generalize from Route 128 and Silicon Valley?, The Review of Economics and Statistics, Vol. 75, No. 4 (Nov., 1993), pp. 761-766

John A. Bishop, S. Chakraborti, Paul D. Thistle, Asymptotically Distribution-Free Statistical Inference for Generalized Lorenz Curves, The Review of Economics and Statistics, Vol. 71, No. 4 (Nov., 1989), pp. 725-727

We construct and run an experiment to test the most basic choice effect predicted by salience theory. Subjects allocate wealth between a risky and a safe investment. While we vary an apparent payoff ratio to influence salience, treatments have economically equivalent consequences. Most other theories of behavior then predict zero effect. Our experimental findings are strongly consistent with the behavioral implication of a continuous version of salience theory. We provide a novel structural estimate on the strength of salience. In our setting, increasing the relative payoff contrast by 1% is equivalent to an increased odds ratio by about 0.4%.

D. S. Prasada Rao, E. Anthony Selvanathan, Dirk Pilat, Generalized Theil-Tornqvist Indices with Applications to International Comparisons of Prices and Real Output, The Review of Economics and Statistics, Vol. 77, No. 2 (May, 1995), pp. 352-360

We consider two competing theories that provide potentially important explanations of price rigidity. The first theory argues that prices are sticky at the aggregate level because of the cumulative effects of relatively short adjustment lags at the firm level. In contrast, the second theory argues that aggregate prices are slow to adjust because individual prices are slow to adjust. We estimate a structural model in which imperfectly competitive firms set prices in order to maximize profits subject to quadratic costs of price adjustment. The results suggest that to the extent that aggregate price rigidity exists, it can be explained by sluggishness of individual price adjustment. However, prices at both the aggregate and individual level are found to adjust rapidly to nominal cost innovations.

The view that small businesses create the most jobs remains appealing to policymakers and small business advocates. Using data from the Census Bureau's Business Dynamics Statistics and Longitudinal Business Database, we explore the many issues at the core of this ongoing debate. We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age, there is no systematic relationship between firm size and growth. Our findings highlight the important role of business start-ups and young businesses in U.S. job creation.