Knowledge that Transforms

Almost all labor-supply models are estimated under the assumption that workers are free to choose their hours. However, theory, casual empiricism, and survey data suggest that many workers are not free to vary the hours within a job. Consequently, labor-supply estimates based on actual hours of work may be biased. Using Canadian data on desired hours of work, the authors find that using actual hours causes labor-supply estimates to be biased upwards. Copyright 1991 by MIT Press.

Ky-hyang Yuhn, Economic Growth, Technical Change Biases, and the Elasticity of Substitution: A Test of the De La Grandville Hypothesis, The Review of Economics and Statistics, Vol. 73, No. 2 (May, 1991), pp. 340-346

Jean-Claude Bosch, E. Woodrow Eckard, Jr., The Profitability of Price Fixing: Evidence From Stock Market Reaction to Federal Indictments, The Review of Economics and Statistics, Vol. 73, No. 2 (May, 1991), pp. 309-317

A central question in industrial organization is why profit rates differ so dramatically across firms and industries. One of the many explanations offered for this phenomenon is the failure of conventional accounting methods to adjust for intangible capital stocks, i.e., it is argued that profit rates do not differ dramatically when capital stocks are correctly calculated to include intangible R&D and advertising capital. To test this hypothesis individual advertising capital stocks are calculated for firms in the toys, distilled beverages, cosmetics, and pharmaceuticals industries, and R&D stocks are calculated for the pharmaceuticals firms. The adjustments do not eliminate the wide dispersion in profit rates. Copyright 1991 by MIT Press.

Commodity prices often provide signals about the future direction of the economy, especially inflation. It has been argued, therefore, that the information in commodity prices should be used in formulating monetary policy. This paper investigates whether a systematic monetary policy response to contemporaneous commodity price shocks would have helped stabilize the postwar U.S. economy. The authors' findings suggest that responding to unexpected commodity price movements would have lowered the average rate of inflation and reduced its variability, while the path of real growth would be relatively unchanged. Copyright 1991 by MIT Press.

Two contributions are made toward understanding variation in marginal value of safety estimates from labor-market studies. First, marginal safety values are obtained from direct measurement of workers' perceived job-related accidental death rates. Second, wage-risk relationships are explored for several categories of workers using the hedonic price method. Statistically significant relationships found for unionized, blue collar, and blue collar-unionized workers imply marginal safety values of 1.5, 1.18, and 2.10 million dollars, respectively. Further results in this paper suggest that alternative methods are needed to measure marginal safety values for workers in other categories. Copyright 1991 by MIT Press.

John A. Bishop, John P. Formby, W. James Smith, Lorenz Dominance and Welfare: Changes in the U.S. Distribution of Income, 1967-1986, The Review of Economics and Statistics, Vol. 73, No. 1 (Feb., 1991), pp. 134-139

The relationship between performance and market structure is investigated, with particular emphasis on the organization of the market on the buyers' side and its effect on seller profit margins. Based on a sample of U.S. manufacturing industries that is stratified according to product group categories as well as degree of seller concentration, it is established that highly concentrated buyers exhibit significant power to impair profitability especially in oligopolistic consumer goods industries. The impact of countervailing power appears to be strong regardless of demand conditions. Copyright 1991 by MIT Press.

This paper reexamines duration dependence in U.S. business cycles using parametric hazard models. Positive duration dependence would indicate that expansions or contractions are more likely to end as they become older. This paper provides statistically significant evidence of positive duration dependence for expansions before World War II and contractions after World War II. The evidence is stronger than in earlier research utilizing nonparametric techniques, because certain nonparametric techniques have low statistical power against the type of duration dependence found in this paper. Evidence is also presented suggesting that expansions became longer, on average, after World War II, while contractions became shorter. Copyright 1991 by MIT Press.

The relationship between Japanese exports to the United States and distributional activities of Japanese affiliates in the U.S. wholesale trade sector is examined by using a sample of forty-four three-digit Japanese exporting industries matched to U.S. industries. The statistical analysis provides evidence supporting the hypothesis that Japanese direct investment in distribution has strongly promoted Japanese exports to the U.S. markets. Copyright 1991 by MIT Press.