Knowledge that Transforms

This study investigates the structure/conduct/performance relationship in retail deposit markets. The study explicitly incorporates conduct as the link between structure and performance in local deposit markets. It attempts to determine whether banks typically behave competitively or strategically, and whether their conduct is influenced by market concentration. The empirical investigation is guided by an equilibrium model of a retail deposit market. The model is applied to regression equations for local (MSA) MMDA and three- and six-month CD rates. The empirical results indicate that strategic conduct is the norm in MMDA and in three- and six-month CD markets. Copyright 1991 by MIT Press.

An index of diversification suitable for manufacturing plants and firms is defined as a function of product number, distribution, and dissimilarity. A novel feature of the index is its continuous treatment of product heterogeneity. Using "Census of Manufactures" data files, the index is constructed for each establishment and each enterprise surveyed in the 1963-1982 censuses. Results are reported at the 2-digit SIC level. While quantifying the upward trend in enterprise diversification, the index reveals an ubiquitous and persistent decline in establishment diversification. Over time, enterprises are shifting toward a more diverse portfolio of increasingly homogeneous plants. Technical economies of scope appear to play little role in explaining the measured increase in enterprise diversification. Copyright 1991 by MIT Press.

The results of a numerical survey of smoking risks and behavior are analyzed. Smoking risk perceptions follow the expected patterns given age differences in risk information acquired and differences in information associated with smoking status. Risk perceptions are greater as one moves to younger age cohorts where overall lung cancer risks are substantially overestimated. These risk perceptions in turn have a negative effect on smoking decisions, where younger individuals behave no differently in terms of the manner in which they incorporate risk perceptions into their smoking decisions. Copyright 1991 by MIT Press.

Recent confirmation of sheepskin effects in the returns to education for prime age white males has been taken as evidence of screening or signaling in the labor market. The authors report evidence of sheepskin effects among women and minority males, and demonstrate that they are somewhat smaller for lower diploma years, but larger for higher diploma years, than those of white males. These are among the first broad-based results confirming the frequent contention derived from signaling models that minorities have smaller returns to low productivity signals, but larger returns to high productivity signals. Copyright 1991 by MIT Press.

Minoru Okamura, Estimating the Impact of the Soviet Union's Threat on the United States-- Japan Alliance: A Demand System Approach, The Review of Economics and Statistics, Vol. 73, No. 2 (May, 1991), pp. 200-207

Two types of moral hazard have been determined. The first type is related to self-prevention activities affecting probabilities of accidents. The second type relates to the agent's activities whenever the accident occurs. The authors' objective consists of presenting an empirical measure of the significance of this second type of moral hazard in the workers' compensation market. The main challenge in isolating moral hazard consists of dividing into two parts the total variation in recovery time with respect to changes in insurance coverage: (1) the variation of consumption corresponding to a given level of information; and (2) the variation of consumption due to greater asymmetrical information. The methodology used in this study separates these two variations. Copyright 1991 by MIT Press.

Males who participated in intercollegiate athletics are estimated to receive 4 percent higher annual incomes than similar nonathletes. No such income premium associated with college athletics is revealed among females. Both male and female athletes who attended colleges and universities in the early 1970s had higher graduation rates than other students. Since the models used to estimate income and graduation differentials included many measurable determinants of labor market and academic outcomes, these findings suggest that athletic participation may enhance the development of discipline, confidence, motivation, a competitive spirit, or other subjective traits that encourage success. Copyright 1991 by MIT Press.

This paper utilizes unique survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 U.S. companies during the 1970s. Market value and earnings are estimated to be about 10 percent-15 percent lower in an average unionized company than in a nonunion company, following extensive control for firm and industry characteristics. Deleterious union effects on firm profitability are sizable throughout the 1972-80 period, but vary considerably across industries. The relatively poor profit performance of unionized companies may help explain the recent decline in U.S. union membership. Copyright 1991 by MIT Press.

The authors estimate the probability that a price fixing conspiracy will be indicated by federal authorities to be at most between 0.13 and 0.17 in a given year. The authors' estimate is based on conspiracy durations calculated from data reported for a large sample of Department of Justice cases, and a statistical birth and death process model describing the onset and duration of conspiracies. Copyright 1991 by MIT Press.