Knowledge that Transforms

Henry W. Herzog, Jr., Alan M. Schlottmann, Valuing Risk in the Workplace: Market Price, Willingness to Pay, and the Optimal Provision of Safety, The Review of Economics and Statistics, Vol. 72, No. 3 (Aug., 1990), pp. 463-470

The results of forecasting experiments based on an error correction mechanism (ECM) model and various types of vector autoregressive (VAR) and Bayesian vector autoregressive (BVAR) models are presented. A Bayesian error correction mechanism (BECM) model is also tested. This model represents a hybrid of the BVAR and ECM models. The results from experiments using fifty industries and monthly Ohio labor market data demonstrate that the ECM model produces forecasts with much lower errors than any of the alternative VAR or BVAR models when the variables used in the model pass the statistical tests for cointegration. The findings confirm many of the beliefs expressed by Granger (1986) and Engle and Yoo (1987) based on theoretical consideration of the ECM model versus the VAR model. A result contradictory to the contentions of Engle and Yoo is that the BECM model performs well at the longer forecast horizons for both cointegrated and non-cointegrated industries.

The authors use three duration models to estimate the effects of disability benefits on the hazard of returning to work and on the expected duration of work absences. The results show that disincentives exist even when disability benefits are not conditioned on the recipient remaining out of work. In addition, blacks and women are found to be absent longer than white men. Durations of work absences are also influenced by available wages, the type and severity of injury, the physical demands of the jobs for which the worker is qualified, and the willingness of employers to help the worker return to work.

Nagesh S. Revankar, Naoyuki Yoshino, An `Expanded Equation' Approach to Weak-Exogeneity Tests in Structural Systems and a Monetary Application, The Review of Economics and Statistics, Vol. 72, No. 1 (Feb., 1990), pp. 173-177

This paper examines the relationship between unemployment durations and cyclical movements in unemployment using an "employment calendar" constructed from recent questions in the Panel Study of Income Dynamics. We find that unemployment durations increase with the unemployment rate with the strongest effects for individuals with the longest elapsed durations.

This paper provides an exploratory assessment of the theory of contestability that is based on a diverse sample of industries and introduces a new important determinant of market concentration. The results of the paper indicate that the variables determining the degree of contestability of markets are significant correlates of market concentration. Sunk costs account for a substantial portion of the sample variance of concentration even after technological factors are controlled for.

Mario I. Blejer, Isabel Guerrero, The Impact of Macroeconomic Policies on Income Distribution: An Empirical Study of the Philippines, The Review of Economics and Statistics, Vol. 72, No. 3 (Aug., 1990), pp. 414-423

Richard J. Butler, James B. McDonald, Ray D. Nelson, Steven B. White, Robust and Partially Adaptive Estimation of Regression Models, The Review of Economics and Statistics, Vol. 72, No. 2 (May, 1990), pp. 321-327

The model proposed here for obtaining the labor supply functions of moonlighters uses a double self-selection system to explore the husband's decision to moonlight together with his wife's decision to work. Subsequently, the labor functions are classified under two regimes depending on whether the wife works. The model is estimated based on a cross-section of 4, 448 married couples from the Survey of Income and Program Participation, Wave 2. I find that the household production time of husbands and wives are substitutes and that specific human capital deters moonlighting.