Knowledge that Transforms

This paper investigates the positive wage-firm size relationship using a sample of workers performing the same jobs in different-sized firms. Controlling for skill differences, wages are still found to be higher in larger firms. Using an estimate of the marginal rate of substitution of income for leisure as a measure of job disutility, the difference in wages between large and small firms is found to be greater than the difference in disutility, ruling out compensating differentials as the sole cause of the wage-size relationship. Hence the argument that labor extracts some of the higher profits of larger firms is plausible.

Kamran M. Dadkhah, Fatemeh Zahedi, Simultaneous Estimation of Production Functions and Capital Stocks for Developing Countries, The Review of Economics and Statistics, Vol. 68, No. 3 (Aug., 1986), pp. 443-451

A method of estimating the distribution of uninterrupted unemploymentspells from aggregate unemployment data is outlined. The methodology does not i mpose constant individual hazard rates and allows for heterogeneity. Characteris tics of the distribution of unemployment spells are then considered including ha zard rates, measures of inequality such as Gini coefficients, and the fraction o f total unemployment associated with S weeks of unemploy-ment. The relationship between these char-acteristics and labor demand variables (GNP) and supply-side variables (transfer payments, unemployment insurance) is considered in or-der to better understand the relative role of short- and long-run unemployment.

A vector autoregression is used to elicit the empirical facts co ncerning exchange rate movements. The author finds (1) the exchange rate, relati ve price levels, and trade balances are closely related;(2) most other lagged v ariables have no perceptible influence in theexchange rate equation; (3) exchan ge rate innovations are negativelycorrelated with innovations in output and pri ces, positively with innovations in the balance of trade, and almost not at all with innovations in money; and (4) impulses in money, trade balances, and govern ment spending are followed by opposing future movements in theexchange rate and the price level. Taken as a whole, the evidence suggests that exchange rate cha nges may be associated with real, rather than monetary, shocks.

The results of this study showed that the decision to eat away from home was positively affected by income while the amount spent away from home was only affected by income, again positively, at higher levels of household income. Food expenditures at home were similarly affected by income only at higher levels of household income provided the household also ate away from home. If the household did not eat away from home, food expenditures at home were positively affected by income at all levels, the effect decreasing in magnitude with the level of income. A SIGNIFICANT economic trend in recent )&Vdecades is the declining share of consumer expenditures on food. Expenditures for food fell steadily from 20.0% of disposable personal income in 1960 to 16.1% in the third quarter of 1983 (USDA). This drop occurred as a result of a decline in the share of consumer expenditures on food purchased for consumption at home. The share of consumer expenditures on meals purchased at restaurants, cafeterias, and fast food chains remained constant at about 4% of disposable personal income. Hence the consumption of purchased meals away from home has become more important relative to food consumed at home. A number of studies on food consumption at home and away from home have been made. Houthakker and Taylor (1970) obtained results that indicate away from home food expenditures were more responsive to total consumption expenditures than at home expenditures based on 1960-61 household budget data. Time-series data were also employed by Houthakker and Taylor to investigate the dynamics of food consumption. Prochaska and Schrimper (1973) found that along with income the opportunity cost of time is an important factor in determining away from home food consumption. Fishe et al. (1979), employing simple and heteroscedastic Tobit models, found that income and household specific circumstances are important determinants of restaurant expenditures. Lamm (1982) estimated a translog demand system for food consumed at home, purchased meals, and non-food items. His results indicated that consumers have been eating away from home more often primarily as a result of increases in their incomes. Recently, Huang and Raunikar (1984) estimated Engel equations for at home and away from home food expenditures using ordinary least squares and Tobit regressions, respectively. In their study Huang and Raunikar found that, in general, at home food consumption is less income responsive than away from home food consumption. The major objective of Huang and Raunikar's study was to investigate the importance to household food expenditures of consigned income for committed expenditures. This study further investigates food consumption at home and away from home employing a switching regression model. The same basic data analyzed by Huang and Rauniker (HR) are also analyzed here. However, since the HR study focused on consigned income, households not reporting complete information with regard to committed expenditures, e.g., rent or mortgage, or after-tax income, were not included in their study. In this study, the emphasis is placed on the household's choice of whether to eat out and the factors affecting consequent away from home and at home food expenditures. The sample includes all households that reported before-tax income and is significantly larger than the sample used in the HR study.

A measure of microeconomic disequilibrium for households facing both budget and quantity constraints is estimated from East data. Using a new specification, the Flexible-Cobb-Douglas utility function, the parameters of a German direct utility function are estimated from West family budgets. It is estimated that an average East family in 1977 would have been willing to give up 13% of its total expenditure in order to attain its demands at official prices.

A simple econometric model of investment in schooling is developed and estimated. The measure of individual discount rates implicit in their educational investment decisions suggests no difference between individuals from different socioeconomic backgrounds. Differences in individual speeds of educational attainment, which do vary with background, explain most of the variation in levels of attainment that is attributable to family background.

This paper analyzes the Gibson paradox, a strong positive correlation between prices and interest rates over the past 250 years. The phenomenon of Gibson's paradox is significant in Britain but not significant in the United States. However, there is a significant correlation between British interest rates and U.S. price levels. The price movements show a strong characteristic of random walk under the gold standard, but appear not to be random walk under the non-gold standard. Based on (a) the price random walk assumption and (b) the real return arbitrage assumption, this paper constructs a simple model to explain the above interesting empirical results.