Knowledge that Transforms

A model of individual tax compliance behavior, including evasion and avoidance, is developed and estimated. The model recognizes the importance of marginal income tax rates, payroll tax contributions and benefits, and the probability of detection and the penalty on unpaid taxes. Share equations for avoidance, evasion and reported income are estimated using individual-level data. The estimation results indicate that the tax base rises with higher benefits for payroll tax contributions and falls with higher marginal tax rates; the base also falls with more severe penalties and more certain detection of evasion as individuals substitute towards avoidance income.

Using hedonic regression techniques, estimates of the willingness-to-pay for changes in the risks of dying can be inferred from actual behavior in market situations involving risk-dollar tradeoffs. Thaler and Rosen (1975) pioneered this approach, obtaining estimates of the value of a statistical life using labor market data, in this paper we use the hedonic technique to obtain the first estimates of the value of a statistical life from data on the market for automobiles. Our estimated value of a statistical life for the sample as a whole is $3.357 million 1986 dollars.

This paper investigates the connection between credit rationing and private intergenerational transfers. The research is motivated by the idea that private transfers may be a source of funds for consumers who have difficulty borrowing from financial intermediaries. This idea has important implications for consumer behavior, and economists have begun to think about it, but they have given it little empirical attention. Using the 1983 Survey of Consumer Finances, we find that private transfers do tend to be targeted toward consumers who face credit rationing. But we also find that a substantial fraction of U.S. consumers are liquidity-constrained even if one allows for the possibility of private transfers.

When choosing a flexible functional form to model multioutput cost structures, one is quickly confronted with severe violations of certain regularity conditions over large regions of output space. This paper explicitly imposes regional properness on the parameter space of flexible functional forms. The apparent trade-off between functional flexibility and functional properness has been identified for the case of the quadratic cost function. Using the quadratic cost function, the proposed procedure is illustrated with an application to the Bell System. The results suggest that the telecommunication industry in the United States--prior to the Bell System break-up--was a natural monopoly.

This paper is an empirical investigation of consumer health information. Using a new direct measure of information, the econometric approach treats both information and physician visits as endogenous variables when estimating the demand for medical care. The results show that information increases the probability that a consumer uses medical care, but that conditional on use the quantity of care consumed is not related to information. The results contradict specific implications of models where physicians can create or induce demand for their own services. Several results suggest that poorly informed consumers tend to underestimate the productivity of medical care in treating illness.

This paper tests if variations in the treatment of expenditures by state and local governments are an explanation for the inconsistent results of previous tax studies. Estimates for net investment and employment in manufacturing for 1962-82 support this conjecture, indicating that state and local taxes have a negative effect when the revenues are devoted to transfer-payment programs and that (with taxes held constant) increases in expenditures on health, education, consistent with the "vicious circle" phenomenon, do not appear simply to reflect common cyclical movements, and provide evidence of structural linkages implicit in previous results for growth in state personal income.

Small business longevity is investigated utilizing a nationwide random sample of males who entered self-employment between 1976 and 1982. Highly educated entrepreneurs are most likely to create firms that remained in operation through 1986. Owner educational background, further, is a major determinant of the financial capital structure of small business startups. Financial capital endogeneity notwithstanding, firms with the larger financial investments at startup are consistently overrepresented in the survivor column. Firm leverage, finally, is trivial for delineating active from discontinued businesses. Reliance upon debt capital to finance business startup is clearly not associated with heightened risk of failure.

A research strategy is suggested that separates the issue of inference from the problems of prediction or of quantitative policy analysis of an empirical parametric model and illustrates a new methodology that enables this in a test for prima facie causality. Unlike the conventional parametric test, the more powerful multiple rank F test is invariant to monotonic transformations of the variables and independent of the error distribution. Employing this test, the Wagnerian hypothesis, supported by conventional parametric analysis, is rejected and the conventional Keynesian theory is accepted.

This paper estimates income and price elasticities for bilateral world trade. In addition to testing the properties of the error terms, the dynamic specification, and the assumption of parameter constancy, the analysis presents the first application of the Bank Spectrum estimator to bilateral trade flows for all countries. The paper finds that bilateral trade elasticities exhibit enough of a dispersion to suggest that the direction of trade is sensitive to changes in income and prices. Using the bilateral elasticities as raw data, the analysis obtains the associated multilateral estimates and finds that they are both consistent with the literature and suitable to addressing questions involving multilateral trade. But the evidence also reveals that sole reliance on multilateral elasticities conceals valuable information for both policy applications and empirical analyses of international trade.