Knowledge that Transforms

David J. Stockton, Charles S. Struckmeyer, Tests of the Specification and Predictive Accuracy of Nonnested Models of Inflation, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 275-283

Policy makers are showing increasing interest in employment and training programs as a means of reducing welfare costs, despite the evidence that welfare costs are reduced little by these programs. This paper examines the potential for increasing the welfare savings associated with such programs by targeting women for whom the attendant welfare reductions are likely to be the largest. It reanalyzes data from five programs and computes welfare impacts as if the programs had been selectively offered. The results suggest that targeting job-search assistance programs is not likely to be effective, but taht there is a potential for improving the effectiveness of subsidized employment and training programs. Copyright 1989 by MIT Press.

James E. Vestal, Evidence on the Determinants and Factor Content Characteristics of Japanese Technology Trade 1977-1981, The Review of Economics and Statistics, Vol. 71, No. 4 (Nov., 1989), pp. 565-571

This paper presents and estimates a simple model of real exchange rate determination that includes the expected future U.S. federal budget deficit as a determinant. The model is applied to the real value of the dollar versus the mark, yen, and pound over the period June 1974-October 1987. The estimates suggest that rapid increases in the expected future deficit in the early 1980s contributed to a rapid appreciation of the dollar. The fall in the value of the dollar in the spring of 1985 appears to be due to a fall in the expected budget deficit. Copyright 1989 by MIT Press.

A test of the hypothesis that estimates of the interest elasticity of personal and private saving may be biased downward by a failure to control for behavior related to defined benefit pension programs fails to reject existence of a positive interest elasticity of private saving. Correcting for pension funding bias, the estimated interest elasticity of private saving is 0.04, well below Michael J. Boskin's (1978) estimate of 0.4 obtained with a different data set and different estimation procedures. The estimated interest elasticity of personal saving is 0.28. Copyright 1989 by MIT Press.

The earnings of married women have a more equalizing effect on the distribution of lifetime family earnings (or the expected present value of earnings) than on the distribution of annual family earnings, using Panel Study of Income Dynamics longitudinal data. The intertemporal variability of wives' labor supply causes the correlation between the lifetime earnings of husbands and wives to weaken relative to the correlation between their annual incomes, resulting in lower lifetime inequality. The inequality of potential income (full employment earnings) is found to be much greater for lifetime earnings than average annual earnings, based on alternative endogenous wage-hours models. Copyright 1989 by MIT Press.

To what extent has the increased supply by government of certain union-like services reduced the demand for union membership and thereby contributed to the decline in trade union density? The existing empirical evidence is meager and conflicting. The puropse of our paper is to reexamine the government substitution hypothesis, specifically with respect to the relationship between government welfare spending and union density. We test the hypothesis with time-series data using three alternative models of union growth. The advantage of this approach is that it will permit an assessment of how sensitive the results are to both specification and sample period changes. In all, we find the time-series evidence of a negative welfare effect on union density to be mixed. Copyright 1989 by MIT Press.