Knowledge that Transforms

M UCH work has been done on the many aspects of the size distribution of income. This includes a large body of literature purporting to explain variations in this phenomenon both temporally and spatially for large geographic units in terms of different and/or changing functional distributions of income (Kuznets, 1953), differential growth rates (Kravis, 1960; Kuznets, 1955), random or stochastic processes (Champernowne, 1963; Gibrat, 1931; Rutherford, 1955), and combinations of economic, social and demographic factors (Aigner and Heins, 1967; Al-Samarrie and Miller, 1967). Conspicuously absent from the literature, however, is any empirical work done on variations in the size distribution of income in small areas, either over time or over space. The omission of time-series analysis of variations among small area income distributions is due largely to the unavailability of small area personal income statistics for all but decennial census years. No such excuse may be offered for the absence of cross-sectional analysis, inasmuch as the last three decennial censuses (1950, 1960 and 1970) have provided data for regions and small areas on a comparable basis. It would appear, however, that published empirical research on size distribution of income in small areas has tended to concentrate more on the nonsubstantive statistical questions such as the identification of ''proper area definitions and less on inter-area variations than is true of inter-state and international income distribution studies which by and large have tended to avoid facing the former issue squarely, or merely assumed that it was irrelevant. This paper will draw together these heretofore unjoined aspects of the study of income distribution. In it we shall construct and test an analytical model for explaining variations in the degree of income concentration among small spatial units in terms of various economic, social and demographic variables which are thought for a priori reasons to be influential. We shall draw upon the approaches of similar studies while modifying them for our own ends, keeping in mind also that our aim is not to verify any single hypothesis such as economic growth or development vis-a-vis income distribution, but to isolate and quantify the influence of a broad group of causal factors which operating simultaneously may determine the degree of concentration of family incomes within a spatial area. Not only will it be shown that the economic and social factors most highly associated with spatial variations in income inequality can be positively identified for small areas, but what is more important, these will be shown to vary over space in relative impact as well as varying in importance according to level of aggregation of the observation unit.

PpT HE purpose of this paper is to test empirically two propositions which have been closely, although not exclusively, associated with Milton Friedman in recent years. The first is the hypothesis that changes in monetary or fiscal policy variables are frequently ineffective in stabilizing some target variable because they are poorly timed.1 The second hypothesis, which was presented by Friedman and Meiselman (1963), is that the money supply is a more important determinant of aggregate demand than autonomous expenditures.2 We test these hypotheses by considering the effects of changes in fiscal and monetary variables upon the movements in gross national product within the framework of a small, short-run econometric model of the United States economy. In our model both money supply and government expenditure are regarded as autonomous manipulative policy instruments. A special feature of the study is a quarter-by-quarter investigation of the effects of changes in each of the two policy variables upon the movement of GNP. The period of investigation dates from the end of the Korean War (1954-I) to the beginning of serious military involvement in Vietnam (1963-IV). The plan of the paper is as follows: In section II we specify and estimate the structural equations of the model. Section III is concerned with a dynamic analysis of the system. Here we derive our estimates of the dynamic multipliers and examine the system for stability. In section IV we utilize the preceding results to determine the relative importance of each of the two policy variables during the sample period. Simplified criteria are suggested and applied for evaluating the actual operation and relative effectiveness of the two types of policy. The final section contains a summary of the main results and some concluding remarks.

T HERE is a growing body of literature on the choice of technology for developing countries.' Much of this literature deals with the factor proportions problem,2 yet there has been little attention directed to the role multinational firms may play in the choice of technology. Yeoman (1968) in a cross-sectional study comparing the operating characteristics of the foreign subsidiaries of 13 United States firms, did find that there was little difference in the amounts of capital used per worker in plants located in advanced, as compared with developing countries. Where the cross-elasticity of demand is low and where manufacturing costs are low, relative to selling price, as in the pharmaceuticals industry, there is little incentive to adapt technology. Yeoman found very little technological adaptation of production processes on the part of pharmaceutical firms. On the other hand, in the home appliances field where cross-elasticities of demand are high and the share made up by production costs in final value, high adaptation was more extensive and more labor was combined into the production process in developing countries. In contrast to Yeoman, the particular concern of this paper is to compare the operating characteristics of multinational and local firms with respect to the ratios in which they combine capital and labor in final output. We address the question: Do multinational firms employ production techniques which are more capital using than those employed by local firms producing similar products? If they do, they could then be singled out as a major contributor to the factor proportions problem confronting developing countries. Two field studies were conducted in which detailed information was compiled for 14 United States subsidiaries and 14 closely matched local counterparts. Nine matched pairs of firms were studied in the Philippines and five matched pairs in Mexico. In four of the sectors studied in the Philippines it was infeasible to obtain closely matched pairs in the Mexican field study.3

Robert C. Blattberg, Evaluation of the Power of the Durbin-Watson Statistic for Non-First Order Serial Correlation Alternatives, The Review of Economics and Statistics, Vol. 55, No. 4 (Nov., 1973), pp. 508-515

PpTHE terms balanced and unbalanced appear in many and varied contexts within economic theory. One writer has even suggested that it is a cause of much confusion that 'balance' in economic could mean almost anything (Ohlin, 1959, p. 338). This lack of definition has also characterized attempts at statistical verification of the theories. Balanced in the Nurkse (1953) sense arose in the context of development economics and sought to provide some policy conclusions for less developed countries. Solow-Samuelson-Von Neuman balanced is of more theoretical interest and of broader application. Two recent papers (Swamy, 1967 and Yotopoulos, 1970) laboured under the disadvantage of mixing these two quite separate notions of balanced growth. We shall argue that consequently, the evidence already presented sheds little light on the development controversy. This paper examines evidence for balanced and unbalanced theories in the Nurkse-Hirschman sense (Haberler, 1961; Hirschman, 1958; Nurkse, 1953). Nurkse's balanced argument involves two propositions: firstly, the size of the domestic market is maximized only with a balanced of sectors because, by assumption, excess supply is wasted and excess demands are frustrated; secondly, the size of the market is the main determinant of investment in less developed countries. Therefore, Nurkse viewed balance as a means of stimulating growth. Hirschman's version of unbalanced growth, like Nurkse's theory, was concerned primarily with the inducement to invest. Only Hirschman argued that excess demand and supply are necessary in order to make investment decisions obvious. Excess demand induces investment in supplying industries (backward linkage) and excess supply leads to the establishment of using industries (forward linkage). It is clear that Hirschman's theory of unbalanced applies mainly to the intermediate goods sector. A number of studies (including Bhatt, 1965 and Mathur, 1966)) have made considerable ground in providing a synthesis of the theories, usually developing the fact that Nurkse and Hirschman exempt vertical and horizontal sectors, respectively. Consequently there may not arise a problem of policy choice between balanced and unbalanced growth. In the context of this paper, the most important feature of both theories is the implicit exclusion of the effects of international trade. If trade becomes the engine of growth in any less developed country, the theoretical controversy becomes less relevant for development policy. Furthermore, distortions in sectoral rates due to international trade, do not constitute unbalanced in the Hirschman sense. These considerations render difficult any empirical enquiry.

Yiannis P. Venieris, Frederick D. Sebold, Richard D. Harper, The Impact of Economic, Technological and Demographic Factors on Aggregate Births, The Review of Economics and Statistics, Vol. 55, No. 4 (Nov., 1973), pp. 493-497

T RADITIONAL theories of international trade have explained the existence and composition of trade between countries in terms of international differences in production functions and factor endowments. More recently, increasing attention has been paid to other influences, which lie at the fringe of the traditional theory. These include the specific character of factors such as natural resources, the influence of tariffs and other restrictions on trade, and differences in size of country. Empirical studies of the composition of international trade have tended to test hypotheses about only a single one of these determinants. Yet it seems unlikely that they are mutually exclusive; one should expect several different influences simultaneously to play a part in shaping any given flow of trade. Accordingly, we have carried out an analysis of a particular trade flow to try to assess their relative empirical importance. The specific trade flow with which we are concerned is that between the Republic of Ireland and the United Kingdom. We have chosen to analyse this trade flow for the following reasons: First, we are fortunate to have detailed data on the flows of merchandise trade between Ireland and the United Kingdom. This information can be linked to the input-output tables of each country, which are comparable at a classification level of forty-seven sectors. We also have detailed and reliable estimates of Irish factor endowments.' Secondly, Irish trade with the United Kingdom forms a large part of her total trade (70 per cent of merchandise exports, and 50 per cent of merchandise imports in 1964). Exports from individual Irish sectors of production frequently account for a large share of sector output, while imports generally form a high proportion of the output of the domestic sector with whose products they are competing. Thirdly, the Irish economy is a small tradedependent economy whose exports have a large primary commodity content. The composition of its trade with its much larger and industrialised trading partner may not be untypical of the position in which so many developing countries find themselves with respect to their more advanced trading partners. It is worth emphasising that the small trade-dependent economy is typical of the great majority of countries. We begin with an empirical test of the Ricardian hypothesis of comparative advantage in its classical two-country, multi-commodity formulation. In the second section of the paper, we present the results of a number of tests concerned with hypotheses about factor proportions. The third section examines the influence of natural resources, and the paper concludes with an account of the role of trade restrictions.

PpT HE loss of aggregate income due to the 1970 recession in the United States is widely recognized and much decried. How the loss has been distributed in society is not so well known and not extensively researched. This paper is concerned with measuring and describing the incidence of the recession on families, by income level. Historical trends in the size distribution of income have been' analyzed by Budd (1970) and Lampman (1971), and its cyclical variability has been studied by Schultz (1969), Metcalf (1972), Thurow (1970), and Mirer (1972). Most of their results suggest that macro-economic downturns increase income inequality or otherwise bear heavily on the poor and near-poor. This analysis examines micro data from a panel survey to measure the pattern of incidence of the loss of aggregate income in 1970, and finds it to be different from the effects found for past recessions. Toward the end of the 1960's, the economy was experiencing high employment along with increasing inflation. Restrictive monetary and fiscal policies along with changes in the structure of government expenditure brought about a worsening of economic conditions. In February 1969 the civilian unemployment rate stood at 3.3 per cent; it rose above 3.5 per cent in September and above 4.0 per cent in February 1970. By December 1970 the unemployment rate was 6.1 per cent. In 1970 real output declined 0.4 per cent from the 1969 level. In describing the distributional effects of these changes in macro-economic conditions, it is essential to compare what actually occurred to what would have occurred under some specified set of alternative conditions. The analytical framework of this study is a comparative statics model in which families' incomes in 1970 are compared to what their incomes would have been then if the aggregate conditions of 19671969 had continued. This approach is particularly relevant for policy purposes because it allows one to judge the distributional costs of the restrictive anti-inflationary policies of recent years.