Recent developments in social welfare analysis provide insights into the selection of price policies. In the presen t paper a CES social welfare function and a weighted average of utilitarian and leximin rules are used to identify optimal producer prices in an economy where government is the price setter and agents are risk averse. The analysis distinguishes between the interests of commercial producers, peasant producers, consumers, and taxpayers. A n application to Zimbabwe indicates that a maize producer price in the low-medium to medium portion of the historical range would be social ly optimal if egalitarian preferences are moderate. This outcome is somewhat insensitive to group weighting schemes and to interpersonal utility correspondences.

The literature on the Fisher effect has ignored the potential relationship between inflation and long-term interest rates. Using an expectations model of the term structure of interest rates, the authors establish the conditions under which innovations in short-term inflation will be transmitted to long-term as well as short-term interest rates. Cointegration tests find support for both the Fisher effect and the expectations theory of the term structure.

While the divestiture of AT&T was intended to produce benefits in the long-distance market, the evidence suggests it has created an unexpected side benefit in local telephone markets. The authors' results show that local exchange carriers have realized immediate cost savings in responding to competitive pressures since the breakup, with the baby Bells experiencing generally larger gains. Dynamically, these productivity gains have increased over time at a relatively constant rate. Although gains of 3-5 percent of total cost are not that large, the absolutely large costs of telephone companies imply significant cost savings of nearly $72 million for the representative firm.

Edward T. Gullason, Bharat R. Kolluri, Michael J. Panik, Social Security and Household Wealth Accumulation: Refined Microeconometric Evidence, The Review of Economics and Statistics, Vol. 75, No. 3 (Aug., 1993), pp. 548-551

The Box-Cox transformation is used to compare alternative functional forms of market value equations. Based on evidence from a panel of 480 publicly-traded U.S. manufacturing companies and two additional data sets used previously in the literature, the semilog form of a Tobin’s q equation is found to be strongly preferred to the commonly estimated linear form. We provide illustrations in which inferences can be affected by the choice of functional form. The authors thank Zvi Griliches, Hendrik Houthakker, and two anonymous referees for helpful discussion and suggestions, and Jerry Stevens for providing access to one of the data sets examined in Section III. Remaining errors are ours. A longer working paper version is available on request. 1