THE quantitative analysis of some economic effects of changes in exchange rates of the world's key currencies has been the subject of a few recent empirical studies,1 inspired presumably by the greater flexibility in currency exchange rates among developed countries that was initiated in the early part of this decade. Relatively large-scale equation systems are employed that take into account the simultaneous interaction among prices, incomes and spending in the economy usually divided into a number of developed countries and a Crest of the world category, the latter subsuming the less developed countries (LDCs). In the context of a small LDC, however, the complexity of the problem is somewhat reduced by the exogeneity of export and import prices (expressed in foreign currency) and the market concentration of LDC foreign trade typically in only a few developed countries. The Philippines is a case in point, about three-fourths of its trade flows throughout most of the post-war period being accounted for by Japan and the United States; moreover, certain principal trade commodities are dependent to a significant degree on only one or two dominant markets. Currency realignments involving these two countries, as exemplified by the 1971 Smithsonian Agreement, represent, therefore, a new form of external economic disturbance which may have significant repercussions on the country's balance of payments, output growth, income distribution and other policy objective variables. In this paper we attempt an evaluation of the direct effects on Philippine merchandise trade of the 1971 realignment of major currencies and the Central Bank decision to keep the exchange rate of the domestic currency (peso) fixed with respect to the U.S. dollar. First, a simplified framework of analysis is presented that identifies the parameters to be estimated for a quantitative assessment of the trade effects. We then estimate export supply and import demand functions for various trade commodities using annual data in the postwar period. The price coefficient estimates, together with the geographic distribution of Philippine trade flows in 1970, provide the empirical basis for examining the quantitative effects on Philippine merchandise trade of the altered sets of peso export and import prices attributable to the 1971 exchange rate changes.

SHORELINE development is a growing public policy issue in many urban areas. While there is some published research on a related topic, the importance of ambient water quality, economists have not yet turned their attention to the economic significance of the existence and width of the undeveloped apron offering public use and access to bodies of water in urban areas. There are several important issues to be considered here. May we expect the urban land market to provide a solution which is Pareto efficient? Have public agencies through zoning and other building restrictions acted in a socially optimal way? What contribution can studies of the determinants of property values make to our understanding of these issues? We begin an exploration of these issues and present some empirical results that enhance our knowledge of the economics of water-related open space. More generally. this paper extends recent economic work that has produced quantitative measures of value for phenomena hitherto restricted to qualitative expression. The process of transforming qualitative into quantitative knowledge, so essential to an empirical science as to be one of its distinguishing features, is well illustrated by the work of Cobb and Douglas on production (1928); Griliches (1961) on the qualitative characteristics of automobiles; and Fogel and Engerinan's (1974) controversial piece on slavery.' With respect to hotusing, implicit prices of each attribute contained in the bundle of housing services have been estimated by hedonic price regressions in the spirit of the work by Lancaster (1971) and others.2 In the following sections we first examine the choice of housing attributes, including waterrelated open space and proximity to bodies of water, faced by a household in a metropolitan area. Next, the process of implicit price formation is examined, and, employing data on individual dwelling units in a metropolitan area with numerous bodies of water, these implicit prices are estimated. We then turn to the question of what can and cannot be inferred from these results about the demand for open space and the welfare gains or losses resulting from possible changes in the amount of water-related open space.

A decade has passed since the passage of the federal Elementary and Secondary Education Act (ESEA) of 1965. Current federal expenditures for compensatory education under that act now exceed $1.5 billion annually. Those expenditures are largely focused on children in the elementary grades, in particular, kindergarten through grade three.' A major objective of compensatory education programs can be viewed as reducing poverty by increasing the human capital stocks of students at the end of their school-lives (i.e., the terminal human capital stock). Proponents of early childhood intervention programs expect terminal human capital stocks to be higher when limited resources are reallocated from later to earlier grade levels. However, empirical research has by and large failed to fulfill this expectation. Evaluations of early childhood intervention programs like Headstart have generally produced inconclusive results (Cicirelli, 1969; Bronfenbrenner, 1974; Ryan, 1974).2 There are several possible explanations for this finding, but the one explored in this research is low marginal productivity, with respect to the stock of terminal capital, of school inputs received in the early grades. While the conventional belief among psychologists and educators has been that this productivity is high (Hunt, 1961; Bloom, 1964), others have argued that the marginal product of school inputs in producing terminal capital is higher in the adolescent years than the early childhood years (Rohwer, 1971). If the latter view is correct, compensatory education programs should maximize terminal capital by increasing school resources in the secondary grades, not the early elementary grades. The purpose of this article is to estimate the productivity of school inputs over time for both and children. The estimates obtained will have implications for the optimal allocation of limited school resources over the school-life.3 In the case of disadvantaged children, the estimates provide one possible explanation for the presumed failure of compensatory, early childhood education programs. In the case of advantaged children, the results offer one prediction of the success of non-compensatory, early childhood education, which is receiving increasing political support these days. The model of human capital accumulation is derived and described in the next section, followed by a discussion of the data and sample used in the estimation of the model. Subsequently, the estimated results are presented, and the policy implications of the results are explored.

DECENT years have witnessed an upswing in economists' interest in various aspects of the distnibution of income. The burgeoning of the size of econometric models has also led to inquiries into the distributional aspects of macroeconomic activity. How much do the poor gain from sustained growth, and who suffers relatively during slowdown and depression? Several attempts have been made to measure just what are the impacts of cyclical economic fluctuations on the distribution of income. Studies by Metcalf (1969), Mirer (1972), Schultz (1969), and Thurow (1970) have employed quite different approaches, and have reached differing conclusions on the cyclical sensitivity of income inequality. Clearly, a more general framework of analysis is needed to evaluate these findings in some perspective. One of the most frequently used approaches in such studies has been to characterize inequality in a distribution by a small number of summary measures (such as a Gini coefficient or an income share) and simply regress these inequality indices on such factors as an unemployment rate, a participation rate, and a per capita income measure. More preferable would be an that (i) explicitly lays out a model of the various channels by which macrofluctuations affect the distribution of income and (ii) examines the effects in a disaggregative fashion on individual income levels across a distribution. Such an approach, forwarded in Beach (1976), involved first modelling the behaviour of a set of individual quantile income levels and then expressing disaggregative income inequality measures in terms of these estimated income quantiles. One can then check the reasonableness of estimated inequality behaviour by examining the underlying behaviour of the individual quantile income levels. This article extends this disaggregative to an examination of implied aggregate inequality changes and compares the results with previous findings by Metcalf (1969) and Schultz (1969). It thus attempts to evaluate and integrate a number of disparate findings by building up summary measures of inequality from individual income quantiles. The outline of the paper is as follows. The next section reviews the indirect quantile approach followed here, and presents estimation results for the cyclical behaviour of a set of income quantiles. In section III the implied behaviour of relative mean incomes and income shares is discussed, and a comparison is presented with Metcalf's results. Section IV contains an aggregation of the results and a comparison with Schultz' findings. Then section V examines the behaviour of several alternative summary inequality measures. Section VI summarizes the principal findings and draws some implications.

whatever the alternative activities might be. Even more generally, protective behavior such as staying at home is widely used, carrying with it substantial opportunity costs. These findings then clearly suggest that the total social cost of crime is understated if only the direct costs of victimization and the expenditures for protection are considered. In this analysis of individual households' responses to crime it is reasonable to treat victimization rates as exogenous. But in a complete model of crime and protection it would be desirable to account for the collective effect of private protection (as well as public police) on the level of crime in the community. The net effect of private protection on the crime rate, however, is unclear. On the one hand, protective measures such as the use of alarms, locks, and watch dogs tend to reduce the crime rate by reducing the expected return to criminal activity. However, some of the measures that individual households adopt for their own protection may in fact increase the level of crime. For example, in the absence of protective behavior, individuals may routinely produce external benefits for their neighbors by keeping watch over the street or by challenging suspicious strangers in the area. If the adoption of protective measures-such as staying inside rather than going out or taking taxis rather than walking-reduces these formerly routine external benefits, there may be a net social loss resulting from private protection. In this case, policies of reducing nighttime fares on public transportation or subsidizing local neighborhood surveillance programs can be justified on efficiency grounds.7

A jobseeker's attitudes towards risk and his perception of the risk inherent in the labor market he is searching have been shown to have a theoretical effect on his expected duration of search, when he is assumed to be searching for jobs in an optimal fashion.' However, no empirical research has adequately tested for these predicted effects.2 This article presents estimates of a reduced-form equation derived from the job search theory3 and tests the following two hypotheses: (1) as the standard deviation of the distribution of potential wage offers increases, an individual's expected duration of unemployment will increase, ceteris pariblis; (2) an individual who is more risk averse than another will have a shorter expected duration of unemployment, ceteris paribbls. The empirical results presented here tend to support both of these hypotheses. Both Kohn and Shavell (1974) and Pissarides (1974) prove, within models of optimal job search, that the more risk averse a job seeker, the lower he will set his minimum acceptable, or reservation, wage. The reservation wage is set to equate the marginal cost of an additional period of search with the expected marginal return from search; any job offer exceeding this wage is accepted and unemployment terminates.4 Determinants of the individual's reservation wage include costs of search, his risk preferences, and his view of the distribution of possible wage offers facing him. As an individual lowers his minimum acceptable wage he will shorten his expected spell of unemployment, given that the distribution of wage offers from which he draws is unchanged. Hence, the more risk averse jobseeker, by lowering his reservation wage, will have to search a shorter period of time, on average, to find an offer acceptable to him. The effect of wage dispersion on duration of unemployment (allowing for adjustment in the reservation wage) cannot be predicted in general from models of job search, despite the belief expressed (from Stigler (1962, p. 236) to Hall (1975, p. 324)) that this effect should be positive. However, when a rectangular wage offer distribution is posited, the intuitively appealing hypothesis (1) can be obtained from a static model of job search (for example, McCall's model (1970)). While the regression specification used in this study to test the two implications presented above was developed in the context of the job search theory, alternative theories could produce these results; hence, the empirical work discussed here is not seen as a test of the search theory.5 Instead, a negative relationship between risk aversion and duration of unemployment could reflect a tendency for individuals to choose occupations and industries with patterns of employment suiting their risk preferences. And a positive association between dispersion in potential wages and duration may

The pseudo data approach to the joint production of petroleum refining and chemicals is described as an alternative that avoids the multicollinearity of time series data and allows a complex technology to be characterized in a statistical price possibility frontier. Intended primarily for long-range analysis, the pseudo data method can be used as a source of elasticity estimate for policy analysis. 19 references.