This paper analyzes the effects of income differentials in fertility on Lorenz curves and standard inequality measures. The role of intergenerational mobility is examined and incorporated into counterfactual simulations based on Brazilian data. Two standard inequality measures move in opposite directions in both the steady state and the transition in response to the elimination of fertility differentials. The counterfactuals confirm the theoretical predictions of misleading intertemporal inequality comparisons in the presence of differential fertility.
The exchange of comments between William Shepherd and Michael Smirlock, Thomas Gilligan, and William Marshall (this Review, December 1986) raised two key points that remain unresolved. The first point is whether Tobin's q ratio, a firm's financial market value divided by replacement cost of its assets, is a better measure of firm performance than accounting rates of return. The second point of contention is whether superior performance, however measured, can be attributed to efficiency rather than market power. This paper offers further clarification on both of these points. In Section I the performance measure choice is shown to be influenced by fundamental differences between finance and economics. In Section II, the structure-performance model employed by Smirlock, Gilligan, and Marshall (hereafter, SGM) and Shepherd is shown to be a special case of a more general model allowing for a dependence of the market-share-performance relationship on the concentration ratio. The same data from the original study by SGM (1984) are used in Section III to provide a comparison of SGM's findings with empirical results from an alternative specification of the structure-performance model. This comparison suggests that attributing superior firm performance exclusively to efficiency is not well founded. Concluding remarks are found in Section IV.
This paper constructs a general equilibrium model of North-South tradein which the North continually introduces new goods. The rate at whichtechnology diffuses to the South is a function of differences in the cost of production in the two regions. The key result of the model is that labor force growth in the South initially increases real wages inthe North (a standard result in classical trade models), but in the long run reduces Northern wages by accelerating the transfer of technology and drawing capital out of the North as well.
A dynastic cycle is a periodic alternation of society between despotism and anarchy. In a society of farmers, rulers, and bandits, population growth simultaneously impoverishes farmers and reduces the ruler's surplus per head. Society evolves into a despotic stationary state or into a dynastic cycle dependent on whether poverty among farmers chokes off population growth before the surplus shrinks to the point where rulers turn to banditry.
The U.S. dollar price of the U.K. pound sterling is tested for a speculative bubble, defined as a period with a nonzero median in excessreturns. A nonparametric procedure is developed, which controls for data mining over the period of flexible exchange rates, and finds a negative bubble in the excess return to holding sterling rather than dollar assets during the period 1981-84. Possible interpretations arebootstrap equilibria (rational bubbles), nonsym-metric fundamentals, and nonrational expectations.
Although the nature of the differences between parties in democratic electoral politics is an enduring question in political science, surprisingly little is understood about the subject. But substantial progress has been made in recent years, most notably in understanding party differences in macroeconomic policies and outcomes. The first breakthrough was Douglas Hibbs's (1977) analysis of party-related differences in the unemployment rate. In his time-series analysis for the United States, Hibbs modeled the path of unemployment as an autoregressive-moving average process subject to a dummy variable intervention term indicating party of the president. His analysis indicated that Democratic administrations were associated with lower unemployment than Republicans by 2.36 points after eight years in office, and even larger differences in long-run equilibrium. A subsequent article by Nathaniel Beck (1982) addressed the same issue, and found the party differences less sharp when administration-specific policy differences are considered. The techniques employed by Hibbs and Beck focus directly on an outcome (unemployment), rather than on the policy instruments that are presumably responsible for altering outcomes. This approach can be misleading when there are long lags between implementation of policies and ultimate effects, or when shocks occasionally intrude upon the regular connections between instruments and outcomes. Macroeconomic theories can provide information about constraints linking macroeconomic variables, but Hibbs and Beck fail to incorporate theoretical constraints. Such constraints could help determine what kinds of outcomes are feasible and sustainable, and to what extent outcomes are induced by policies as opposed to shocks. Our purpose here is to consider how one might go about estimating party differences in a framework that takes advantage of some insights offered by macroeconomic theories, and to report some preliminary results. (A more complete description of the analysis is provided in our working paper, available upon request.)
A common view of golden parachutes and shark repellents is that they are designed by management to insulate itself from the discipline imposed by the market for corporate control and so are harmful to shareholders. This paper offers an alternative view that these devicesare beneficial to shareholders because they allow better contracting between manager and shareholders. Evidence on the incidence of goldenparachutes and on the compensation-tenure relationship for managers of golden parachute firms supports the alternative view.
The equilibrium of capital and equilibrium market prices are derived for a world economy with a unified securities market, mobile capital, no uncertainty, and varying tax rates on different sources of income in each country. The paper then characterizes optimal tax rates for a small country in this setting, focusing on the peculiar incentives created when the before-tax rate of return differs among securities due to differences in their typical tax treatment.