Knowledge that Transforms

Specific egalitarianism calls for the equalization in the consumption of specific commodities and is a guiding principle of redistributional policy in the United States. It is therefore of interest to evaluate the impact of specific egalitarianism on general egalitarian measures of inequality. For this purpose, multidimensional measures of welfare inequality are disaggregated into subindexes of inequality defined over the distributions of components of individual welfare. The welfare components are taken to be subutility functions identified through the two stage budgeting process. The effect of eliminating inequality in the distribution of a specific welfare component on total welfare inequality is examined for the United States.

John M. Fitzgerald, The Taste for Bequests and Well-being of Widows: A Model of Life Insurance Demand by Married Couples, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 206-214

Contrary to one of the predictions of the contestability hypothesis, price in deregulated U.S. passenger airline markets is related to actual competition from diversifying former intrastates and newly established carriers. More important, former intrastates have a larger impact on price than do newly established firms--a result consistent with these markets being imperfectly competitive because of an industry experience barrier to entry. Unlike actual competition, a measure of potential competition has no effect in constraining price.

Aaron K. Han, Daekeun Park, Testing for Structural Change in Panel Data: Application to a Study of U.S. Foreign Trade in Manufacturing Goods, The Review of Economics and Statistics, Vol. 71, No. 1 (Feb., 1989), pp. 135-142

Steven H. Lustgarten (1975) and others have presented evidence that concentrated buyers lower the price-cost margins of sellers, but theory predicts that buyer concentration is positively correlated with administrative control of transactions. This paper shows that administrative control is responsible for the observed effect of buyer concentration. When a proxy for administrative control is included in Lustgarten's model, buyer concentration becomes insignificant.

Timothy A. Deyak, W. Charles Sawyer, Richard L. Sprinkle, An Empirical Examination of the Structural Stability of Disaggregated U.S. Import Demand, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 337-341

The life cycle/permanent income hypothesis suggests that optimization by consumers should cause marginal utility to approximate a random walk. As a consequence, purchases of nondurable goods should also approximately follow a random walk and purchases of durable goods should approximately follow a white noise process. The univariate processes for nondurables and durables both appear to be random walks, which would confirm the LC/PIH for nondurables and reject it for durables. Adjustment costs and nonseparability between durables and nondurables are then added to the specification of utility. The resulting more general stochastic process is estimated and the data tend to support the existence of nonseparabilty, but not adjustment costs. While forecasts of durables are not fully informationally efficient, they do about as well as do forecasts of nondurables. The behavior of durable consumption purchases is shown to be consistent with the life cycle/permanent income hypothesis.

Extreme bounds analysis attempts to measure the effects of the uncertainty in the specification of the explanatory variables in a regression model on the estimated coefficients of interest. Standard errors for the stochastic extreme bounds are computed using the bootstrap technique. State-by-state cross section data are used to study the deterrent effect of capital punishment in the United States in 1950. The bootstrap standard errors are sufficiently large for some bounds to suggest caution in the interpretation of the empirical results regarding the fragility of inferences for the deterrent effect of capital punishment.