Knowledge that Transforms

The specification of dynamic models typically leads to the estimation of impact responses. A transformation that allows for the direct estimation of the implied long-run parameters is discussed and the problem of choosing an appropriate estimator is addressed. Because the standard estimators of long-run responses involve ratios of regression coefficients, they typically do not possess finite sample moments. We argue that this existence of moments problem is fundamental to the observed disparity of long-run estimates. Simulation experiments are used to evaluate the properties of the standard implied estimator and a minimum expected loss estimator.

This paper offers an event analysis of nine airline mergers proposed in 1986, in an attempt to determine whether firms, if given the opportunity, will merge to gain market power. The Jaffe/Mandelker method of independent event draws is used as the event test. Abnormal returns experienced by competitors to those airlines announcing mergers support the merger for market power hypothesis, contradicting previous literature on horizontal mergers.

Previous studies of owner-occupied housing typically ignore the taxation of capital gains because homeowners do not pay a capital gains tax if they buy up when they move. However, the capital gains tax code introduces a kink into the budget constraint of most previous homeowners, causing previous owners to face a different price of housing depending on whether they buy up or down. We control for the kinked budget constraint within a maximum likelihood model of owner-occupied housing demand. Results indicate that failure to model the capital gains tax provisions leads to inefficient estimates of the elasticities of demand. However, controlling for the kink did not lead to statistically different coefficient estimates relative to a linear budget constraint model.

This study confirms the higher productivity levels predicted by advocates of regulatory reform in trucking and shows that these gains have been substantial. Cost simulations suggest that, following a year of higher expenditures, efforts to remain competitive have yielded considerable cost savings that increase over time, from 1 percent in 1981 to 23 percent in 1984. The indirect effects of reform through the independent variables initially decrease costs, but later lead to higher costs. The cumulative effect has been a less than 1 percent increase in costs in 1980, becoming by 1984, a significant 16 percent productivity gain.

The authors test for the presence of a "worker discipline effect, " wherein macroeconomic conditions influence worker effort, and examine interindustry variation in its strength. An employment function analysis is first used to find evidence of a worker discipline effect in the majority of U.S. three-digit manufacturing industries. A factor analysis of industry, firm, and labor market characteristics is then used to identify several underlying factors by which industries can be distinguished. The authors find that the strength of the worker discipline effect is positively and significantly correlated with the degree to which industries have "secondary" characteristics.

This study provides rationale for the underrepresentation of women in the pension sector and examines the consequences for the gender wage gap. For a given set of observed characteristics, a woman is 11-19 percent less likely than a man to have a pension. Of the unexplained portion of the gender wage gap, 10-38 percent is due to unexplained differences in pension coverage. Finally, consistent with a screening effect of pensions, women are paid more equally in the pension sector.

A model incorporating SSI participation, information and perceptions of program eligibility is developed and estimated using data from the 1980 PSID. The model assumes the participation decision process begins in an uninformed regime and switches to an informed regime if the perceived benefits are sufficiently high. In this informed regime individuals participate if perceived benefits exceed perceived costs. We find that the acquisition of information is responsive to actual program generosity just as is participation itself. Faulty information, which may be the proximate cause of low participation rates, is apparently, in part, a consequence of low perceived net benefits.

This paper applies a recursive model of structure-entry-performance with structural feedbacks to sixty-two Korean manufacturing industries for 1976-81. The results strongly support the market power hypothesis. The results also indicate that, despite active government intervention, the invisible hand is working: structure is evolving as expected with high profits leading to entry and consequently lower profits. However, there is little support for limit pricing hypotheses in this explosively growing economy.

Richard C. K. Burdekin, Paul Burkett, A Re-Examination of the Monetary Model of Exchange Market Pressure: Canada, 1963-1988, The Review of Economics and Statistics, Vol. 72, No. 4 (Nov., 1990), pp. 677-681

Alan B. Krueger, John F. Burton, Jr., The Employers' Costs of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy, The Review of Economics and Statistics, Vol. 72, No. 2 (May, 1990), pp. 228-240