Knowledge that Transforms

A health-oriented choice model is developed in which individuals are viewed as producers of health and good health is desired for both consumption and investment purposes. Individuals are able to adjust their consumption of medical care in order to defend against reductions in air quality. A compensating variation type marginal willingness to pay expression is derived for improved air quality and the model is tested using cross-sectional data on employed adult residents of St. Louis, Missouri. Estimates of marginal willingness to pay for the average employed person are derived for a 30% reduction in ozone. These values range from $18.45 to $24.48 per year.

Recently a number of authors have criticized the role of devaluations in traditional stabilization programs.It has been argued that, contrary to the traditional view, devaluations are contractionary, and generate a decline in aggregate output.In spite of the renewed theoretical interest in the possible contractionary effects of devaluations, the empirical evidence on the subject has been quite sketchy.In this paper the Khan and Knight (1981) model is extended to empirically address the issue of contractionary devaluations.The extended model considers the effect of money surprises, fiscal factors, terms of trade changes and devaluations on the level of real output.The results obtained, using a variance components procedure on data for 12 developing countries, provide some support to the short-run contractionary devaluation hypothesis; the results obtained indicate that in the short run a devaluation will generate a decline in aggregate output.It is also found that after one year a devaluation will have an expansionary effect on output.The evidence suggests that in the long run, devaluations will have no effect on output.

Abstrac-t-The profits of leading firms in concentrated markets may be due to market share related cost efficiencies or market power. One way to identify the separate effect of market power is to analyze the relationship of market concentration and market share to the prices charged by firms in local geographic markets. This study analyzes the prices charged by supermarkets in local Vermont markets. Prices are significantly higher in more concentrated markets. The Herfindahl index, as a concentration measure, out-performs the four-firm or one-firm concentration ratio. Herfindahl marginally out-performs a firm's market share as a predictor of its price level.

Japanese input coefficients are used to investigate the pattern of comparative advantage in the exportation of manufactured products in a cross-country framework. Estimates are made for the imports of manufactured products as well as for net exports. Also, alternative techniques of estimation are utilized and an attempt to explain the residuals in the regression equations and to indicate the predictive power of these equations is made. The paper shows that patterns of comparative advantage in manufactured goods can be explained by reference to commodity characteristics and country characteristics. In turn, intercountry differences in the extent of trade orientation, the concentration of exports, and foreign direct investment explain part of the residuals of the cross-country regression equations. Finally, it has been found that the method applied permits projecting the factor intensity of trade for individual countries.

Recent research by David Lilien shows that a significant fraction of aggregate unemployment can be explained by the dispersion of employment growth across industries. This paper presents two new results in this area. First, it is shown that a significant fraction of the variation in Lilien's dispersion index is due to the differential impact of oil shocks across industries. Second, and more important, it is shown that, once the dispersion in employment growth due to oil shocks is accounted for, the residual dispersion has no explanatory power for unemployment.

Robert A. Connolly, Barry T. Hirsch, Mark Hirschey, Union Rent Seeking, Intangible Capital, and Market Value of the Firm, The Review of Economics and Statistics, Vol. 68, No. 4 (Nov., 1986), pp. 567-577

Badi H. Baltagi, Dan Levin, Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered, The Review of Economics and Statistics, Vol. 68, No. 1 (Feb., 1986), pp. 148-155

This paper examines short-term volatility in the real effective exchange rates of industrial countries and its impact on their imports. It yields three conclusions. First, volatility has not diminished as markets have gained experience with floating exchange rates; the trend appears to be in the opposite direction for some countries. Second, exposure to short-term volatility has differed among countries; Japan and Sweden have experienced much more than most other industrial countries. Third, volatility appears to depress the volume of international trade. This third finding is consistent with results reported by Cushman and by Akhtar and Hilton and challenges earlier findings by Hooper and Kohlhagen.