T HE rapid rate of increase in the prices of houses in recent years has resulted in renewed interest in trends in residential real estate. A widely quoted study by the Harvard-MIT Joint Center for Urban Studies (Solomon, et al., 1977) showed that in 1976 only 27% of families could afford to buy the median priced new home, a significant change from 1970 when 46% of families were able to make such a purchase. Such rapid changes could result in significant income redistribution effects, and policy proposals have been numerous. To assess these trends and proposals, it is necessary to have accurate methods of developing residential real estate price indexes. Most real estate indexes have been based on the average or median selling price in each year for new or used houses. Yet there may exist substantial differences in the houses on the market at different times, so such indexes contain quality changes as well as pure price changes. Because housing is a highly heterogeneous commodity, the measurement of quality-adjusted price changes has proven difficult. Such measurement is desirable not simply because of the recent significant price changes in the real estate market, but also because economists have found property values to be one of the best sources of information on goods for which markets do not exist. Although in the past cross-sectional studies have generally been used for this purpose, questions remain concerning the timing of the impacts. Comparisons of real estate price indexes can provide insights into the dynamics of such effects. Among the techniques suggested for developing quality-adjusted price indexes, approaches using hedonic regressions and repeat-sale regressions appear to be the most promising. In this paper, alternative local price indexes are developed using modifications of the hedonic and repeat-sale techniques. For the case considered, the two independent techniques provide statistically identical indexes of the real price of housing. The estimated rate of increase in house prices using the hedonic and repeat-sale techniques is substantially lower than the non-quality adjusted rate implied by the change in average selling price

James A. Dunlevy, A Test of the Capacity Pressure Hypothesis Within a Simultaneous Equations Model of Export Performance, The Review of Economics and Statistics, Vol. 62, No. 1 (Feb., 1980), pp. 131-135

Mario I. Blejer, Leonardo Leiderman, On the Real Effects of Inflation and Relative-Price Variability: Some Empirical Evidence, The Review of Economics and Statistics, Vol. 62, No. 4 (Nov., 1980), pp. 539-544

The authors find that a significant relationship exists between vertical integration and expenditures for basic and applied research for the US petroleum industry, 1954-1975. They advance several hypotheses consistent with this finding, and conclude that organizational structure influences expenditures on research in the modern business enterprise.

A N important and growing interest among scholars is the examination of the relationship of the size distribution of income to city size. Such information is critical to the development of urban growth policies and to our understanding of living costs, poverty, and public expenditures in urban areas. Previous studies of this relationship have been motivated by one of the following distinct, although not mutually exclusive, hypotheses: (1) the occupational and wagestructure of the local labor market will change with increasing city size to cause income inequality either to decrease as a result of rising average incomes (Duncan and Reiss, 1956; Murray, 1969; and Richardson, 1973) or increase via a widening distribution of labor skills (Mathur, 1970; Farbman, 1975);' (2) the functioning of capital markets will improve as city size increases so that investment in human capital rises and the average rate of return is depressed to reduce inequality (Frech and Burns, 1971; and Burns 1976); and (3) the principal beneficiaries of increasing city size and urban growth will be those individuals who possess advantages in the marketplaces, such as landlords and individuals owning enterprises with scale economies or holding important non-duplicative executive and bureaucratic positions, so that the benefits from increasing city size will be unequally distributed and cause the level of income inequality to rise (Haworth, Long, and Rasmussen, 1978). To our knowledge none of these hypotheses have been examined for cities that are partially or totally removed from the influence of SMSA economic regions. However, each argument possesses implications for smaller cities which, when examined, produce results relating to the validity and overall understanding of the hypothesis being presented. For example, the monopoly hypothesis may be relevant to SMSAs but we do not know the city size at which monopoly advantages in the marketplaces become significant in worsening income inequality. The relatively smaller demand for rental properties, more competitive business environment, and lesser importance of executives and bureaucrats will substantially reduce the effect of monopoly advantages in smaller cities. It is therefore quite possible that growth in smaller cities may not exert an independent inequality increasing effect on the distribution of income. Arguments can also be made for modificationis in the human capital hypothesis. While an individual's investment in human capital may substantially define his earnings' potential, imperfections in factor markets and discriminatory employment barriers will influence the earnings that are realized. Furthermore, disequilibrium effects in both capital and factor markets resulting from urban growth (in addition to possible changes in attitudes affecting employment barriers) are likely to vary among cities. Consequently, these additioial considerations can influence the equalizing role which capital markets are presumed to play with increasing city size. Moreover, businesses and labor will be attracted or repelled by existing agglomeration economies that are related to city size. Therefore, changes in the occupational and wage structure are not independent of city size. Increases in population in smaller cities may yield gains from specialization and diversification that permit lower income groups to increase their Received for publication May 21, 1979. Revision accepted for publication December 10, 1979. * Northern Illinois University. The author wishes to thank Barry Field and two anonymous referees of this REVIEW for their helpful comments on earlier drafts of this paper. 1 Citing the labor-supply-oriented model by Newhouse (1971) and the labor-demand-oriented model by Thurow (1975), which' both assign industrial mix a major role in inequality, Danziger (1976) finds that 7 out of the 11 major Census occupational groups are significant in explaining inter-city variations in inequality but was unable to relate city size to inequality. Long et al. (1977), on the other hand, found population size and change in population variables to be positive and significantly related to inequality but failed to relate their finding to any particular hvyothesis

B ECAUSE many capital assets lose value as they age, it is important both for tax policy and for national income and wealth accounting to be able to measure the pattern of this depreciation. The economic theory of depreciation was first presented by Harold Hotelling in 1925. There was a gap of fifty years before this seminal piece was developed in discussions of depreciation/replacement' rates by Jorgenson (1975) and by Hulten and Wykoff (1976). The desire to add together capital with different characteristics and of different vintages to form an aggregate usable in national wealth accounting stimulated further work in the estimation of depreciation patterns and rates. In 1969 Taubman and Rasche investigated depreciation for office buildings, while in 1970 Wykoff did likewise for automobiles. The purpose of this article is to present a technique for estimating depreciation/replacement rates for the residential stock of housing using data for the United States, 1950-1970, and to compare these estimates with rates calculated by others for specific types of residential housing. This research relies upon the following assumption made explicit in Wykoff (1970): all housing capital, regardless of type, depreciates in the same fashion. Though this assumption is called into question by the results of Wykoff's research for automobiles, it is not formally tested here because of data limitations. In addition, depreciation/replacement rates are calculated in two ways. The first uses benchmarks that reflect the change in price or market value of units over time only, and the second uses benchmarks that reflect this price change plus the cost of maintenance and repair expenditures for the units. In the following section the theory underlying the depreciation/replacement rate estimation technique is presented, and the calculation of benchmarks for housing units of new equivalents, an essential step in the process, is covered in detail. Section C contains comparisons of benchmarks and depreciation/replacement rate estimates, and in section D, conclusions are drawn from the research as a whole

Jacob S. Dreyer, Andrew Schotter, Power Relationships in the International Monetary Fund: The Consequences of Quota Changes, The Review of Economics and Statistics, Vol. 62, No. 1 (Feb., 1980), pp. 97-106