In their seminal study on interindustry wage differentials, Krueger and Summers (1988) expressed estimated industry differences as deviations from a hypothetical employment-share weighted mean. Virtually the whole labor literature has followed their approach, yet most studies avoid calculating the exact standard errors of these differences. This note relates this problem to the general literature on dummy variables and their interpretation. It is demonstrated that the implementation of exact estimates involves only simple matrix operations, making any approximative procedure difficult to justify. Disregarding this conclusion will in practice, even with large samples, lead to substantially overstated standard errors of the estimated differentials and to the understatement of their overall variability.

We develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and the presence of risk premiums. Using weekly dollar–sterling, dollar– mark, and dollar–yen data, the restrictions implied by our framework are not rejected, and spot and forward exchange rates together are well represented by a vector error correction model (VECM). Dynamic out-of-sample forecasts up to one year ahead indicate that the VECM is strikingly superior to a range of alternative forecasts, including a random walk and standard spot-forward regressions.

This paper uses three different approaches to investigate whether the declining provision of public capital is a major cause of declining labor productivity. The juxtaposition of approaches removes the variability in estimates due to dissimilar variable definitions and econometric methodologies. Estimates are based on U.S. time-series data and are evaluated by the implied elasticities of substitution, the prediction of labor productivity trends, and the impact of public capital on productivity. As the three approaches yield very different estimates, it will be hard to ever settle the debate about the effect of public capital on private productivity.