Knowledge that Transforms

Federally insured student loans constitute an area that is almost completely unexplored by researchers despite intense scrutiny that federally insured loans are receiving after the savings and loan collapse. Based on a probit model of default for two thousand guaranteed student loans, the authors find that individual characteristics (including parents' income, presence of two parents at home, student's graduation, and student's race) have a significant impact on default rates, while institutional characteristics (four year vs. two year college, private vs. public, school size, and individual school dummies) have little significant effect. The results imply that proposals to penalize colleges with high default rates are premature.

This paper is the first study investigating wage-risk relationships for both fatal and nonfatal work-related accidents on the basis of a large occupational data bank. Risk variables cover the whole array of potential configurations found in the literature, while based on the compensated accidents over a four-year period for the province of Quebec. The authors first estimate the model using the standard techniques developed by previous researchers and then submit their initial results to additional tests that, in the past, had disturbing effects. It becomes apparent, however, that in all but one case the results remain positive and significant.

For a seventeen-year panel covering 308 U.S. manufacturing corporations, we analyze firms' R&D spending reactions to changes in high-technology imports. On average, companies reduced their R&D/sales ratios in the short run as imports rose. Individual company reactions were heterogeneous, especially for multinational firms. Short-run reactions were more aggressive (i.e., tending toward R&D/sales ratio increases), the more concentrated the markets were in which the companies operated, the larger the company was, and the more diversified the firm's sales mix was. Reactions were less aggressive when special trade barriers had been erected or patent protection was strong in the impacted industries. Companies with a top executive officer educated in science or engineering were more likely to increase R&D/sales ratios in response to an import shock, all else equal. Over the full 17-year sample period, reactions may have shifted toward greater average aggressiveness.

It sometimes happens that the unobservable state vector of a linear dynamic model expressed in the state space is subject to known restrictions. Incorporation of this information into the Kalman filter procedure will increase the efficiency of estimation. It is shown that a simple augmentation of the measurement equation constrains the estimated state vector to obey the restrictions. The method applies whether the restrictions are time-invariant, time-varying, linear, or nonlinear.

Using micro-data from the Current Population Survey, the author examines the sensitivity of conclusion regarding time-series changes in inequality to the measure of inequality employed and to the population group analyzed. Although changes in inequality over time are sensitive to the measure of inequality, the author finds a general pattern of stable or decreasing inequality throughout the 1970s followed by a period of increasing inequality. Based upon a decomposition analysis, the author concludes that these changes are not simply the results of the changing employment distribution among groups, defined by sex, age, education or industry. Instead the rise in inequality results from an increase in inequality within these groups.

To deter entry into new product markets, firms most often use the creation of product loyalty through advertising and the preemption of markets through numerous and broad patents. Filling all product niches, making the results for highly profitable division, and advertising are used most frequently for existing products. For newly developed products, strategic entry deterrents are used more often when markets are concentrated, populated by large firms, and research intensive. Strategic entry deterrents for existing products are used in concentrated, research intensive markets, but firm size has no effect. Firms develop strategies to deter entry less when other barriers exist.

Does a mother's welfare receipt increase the future dependency of her children? Does the welfare system, thus, stimulate the dependency of future generations? Parameter estimates reported here suggest such intergenerational effects. The sample comprises young girls and their mothers. After control for observed and unobserved heterogeneity, a mother's welfare participation is found to increase her daughter's later welfare dependency.

This paper is a cross-section study of the effect of real devaluations on capacity utilization during stabilization programs in LDCs. It finds that such devaluations had a significant negative effect on output as predicted in many recent papers. This was not because devaluation caused a rise in aggregate saving but more because of a sharp contraction in investment. External factors, such as terms of trade and the capacity to import, had a significant positive impact while monetary and fiscal policy played only a minor role.

This paper characterizes the patterns of intergenerational mobility in the United States using data for matched parent/child pairs from the National Longitudinal Surveys. In general, what is found is far from the extremes of either perfect mobility or perfect immobility. Parents' log income explains only about 9 percent to 11 percent of the variation in children's log incomes. Earnings exhibit more mobility than does total income, and the difference is most striking for daughters. The paper also identifies the influence of family background characteristics on mobility. The addition of these background variables adds another 3 to 5 percent age points to the R2 in the intergenerational earnings and income regressions.

Glenn W. Harrison, H. D. Vinod, The Sensitivity Analysis of Applied General Equilibrium Models: Completely Randomized Factorial Sampling Designs, The Review of Economics and Statistics, Vol. 74, No. 2 (May, 1992), pp. 357-362