Knowledge that Transforms

Jeong J. Rhee, John A. Miranowski, Determination of Income, Production, and Employment Under Pollution Control: An Input-Output Approach, The Review of Economics and Statistics, Vol. 66, No. 1 (Feb., 1984), pp. 146-150

The efficiency with which coefficients in probit models are estimated is improved by exploiting data on continuous ancillary variates.In this paper the resulting gains in efficiency are examined and illustrative calculations are provided.Extra precision is achieved at the cost of making an extra assumption but this assumption can be tested.It is shown that fully efficient maximum likelihood estimation of the probit model with a continuous ancillary variate can be achieved by a simple two step procedure involving an ordinary least squares and a probit estimation.

A maximum likelihood method for estimating and testing for the proper functional form in first difference regression models is developed. The parametric transformation of the regression variables we propose includes simple first differences and percentage changes as special cases. The method has a simple relationship to the familiar Box-Cox test, and the coefficient estimation and LR testing are easily implemented with standard regression packages. We apply the new method to three published studies: the St. Louis equation, a money demand model, and a model relating poverty to economic growth.

Walter J. Mead, Asbjorn Moseidjord, Philip E. Sorensen, Competitive Bidding Under Asymmetrical Information: Behavior and Performance in Gulf of Mexico Drainage Lease Sales, 1959-1969, The Review of Economics and Statistics, Vol. 66, No. 3 (Aug., 1984), pp. 505-508

This paper reexamines a much-studied topic, the effects of surface freight regulation. It demonstrates that several studies use invalid methods to estimate the welfare costs of rate regulation, develops a correct procedure, and provides estimates of the welfare effects using data and modal market share relationships estimated by Boyer. The paper also analyzes some implications of the common assumption that the demand for total freight shipments by all modes is perfectly inelastic.

This paper develops an approach to estimating nonhomotheticity and technological bias within the class of nonhomothetic CES production functions. The model is applied to cross-section firm level data covering seven industries in Mexico, Brazil, Colombia, and four Central American countries for the period 1970-74. Positive nonhomotheticity (higher capital intensity for larger plant size given factor price ratios) is found in six industries. Other results are that, once nonhomotheticity is accounted for, technological bias is not predominantly capitalusing, and equality of capital intensity between transnational and domestic firms is pervasive.

Michael L. Wachter, William L. Wascher, Leveling the Peaks and Troughs in the Demographic Cycle: An Application to School Enrollment Rates, The Review of Economics and Statistics, Vol. 66, No. 2 (May, 1984), pp. 208-215

Richard M. Adams, Thomas D. Crocker, Richard W. Katz, Assessing the Adequacy of Natural Science Information: A Bayesian Approach, The Review of Economics and Statistics, Vol. 66, No. 4 (Nov., 1984), pp. 568-575

A price endogenous numerical general equilibrium model of world trade is used to analyze terms of trade issues in the North-South debate. Seven regions are identified, the U.S., EEC, Japan, Other Developed, OPEC, New Industrialized, and Less Developed Countries. The model is benchmarked to a global 1977 micro consistent data set. In the central case analysis, protectionist trade policies in the North inflict an annual welfare loss on the South of around 30 billion dollars per year with an associated terms of trade deterioration of around 9%. The annual welfare cost to the South from northern trade restrictions is somewhat larger than annual North-South aid flows. Protection in the South, and the potential terms of trade impacts of differential growth, are also analyzed.