Knowledge that Transforms

J. S. Butler, Kathryn H. Anderson, Richard V. Burkhauser, Work and Health after Retirement: A Competing Risks Model with Semiparametric Unobserved Heterogeneity, The Review of Economics and Statistics, Vol. 71, No. 1 (Feb., 1989), pp. 46-53

This paper investigates the statistical properties of a set of Canadian and U.S. economic time series and uses the data to address the question of the importance of monetary variables in Canadian business cycle fluctuations. The individual time series are found to contain unit roots, but the data reveal the existence of several economically meaningful cointegrating vectors. A multivariate vector error correction model is estimated, and Canadian velocity, which appears as an error correction term, is significant in the Canadian output equation. This supports the contention that monetary variables have predictive content for real output.

Scott E. Atkinson, Joe Kerkvliet, Dual Measures of Monopoly and Monopsony Power: An Application to Regulated Electric Utilities, The Review of Economics and Statistics, Vol. 71, No. 2 (May, 1989), pp. 250-257

An alternative approach to the measurement of horizontal inequality is developed. This measure of inequality is based on an explicit social welfare function which is formulated so as to be consistent with the basic principles of social choice. The arguments of the social welfare function are welfare functions that depend on prices, total expenditure and the demographic composition of the household. The level of horizontal inequality is defined to be the difference between the level of social welfare attained at a perfect horizontally egalitarian distribution of welfare and the level of social welfare attained at the existing distribution of individual welfare. The level of horizontal inequality induced by the introduction of commodity taxes is evaluated for the United States over the period 1947-85.

Two important issues in econometric freight transportation demand analysis are addressed: (1) the simultaneity between quantity shipped and mode/destination choices, and (2) the effect of spatial price competition on the demand for the transportation factor. In the theoretical model, spatial price competition determines the firm's market area and, thus, determines its sales and shipment sizes. The model is estimated using switching regression techniques, since shipment size and mode/destination choice are derived from the same optimization problem. The empirical model provides consistent estimates of unconditional freight demand. These estimates are needed to forecast transportation flows and derive elasticities for policy analysis.

A number of analytical contributions have given sufficient conditions under which Leontief multiplier estimates are biased. This paper uses empirical data and a Monte Carlo framework to evaluate the problem of bias and obtains the opposite conclusions. For practical purposes, it appears that linear multiplier estimates are unbiased. The variance properties of these estimates are also evaluated.

The research input-output relationship is quantified by use of a unique panel data set of research expenditures (1963-75) and aggregate publication output (1970-75) for each of the 48 contiguous U.S. state agricultural experiment station. Year-to-year fluctuations in research expenditures showed little systematic influence on research output, while on-average or longer-run differences in research expenditures between states appear to influence research performance in a fairly systematic manner. Using citation performance to adjust publication output for differences in scientific quality increases the research expenditure output elasticity by around 25 percent, while also increasing the mean agricultural research gestation lag from 2.8 to 3.4 years. Residual state-specific effects, measuring relative research efficiencies, do not appear to be correlated with levels of research expenditures.

A random coefficients Kalman filter model of the response of commodity prices to weekly M1 announcements indicates a gradual evolution in the credibility of the Federal Reserve as an inflation fighter. The October 1979 announcement of a change in monetary policy aimed at reducing inflation did not result in an immediate increase in credibility, and the October 1982 announcement of a policy reversal did not diminish credibility. Credibility does vary with the underlying rate of inflation, which shows that markets pay attention to policy results not simply policy announcements.

Robert W. Rich, Testing the Rationality of Inflation Forecasts from Survey Data: Another Look at the SRC Expected Price Change Data, The Review of Economics and Statistics, Vol. 71, No. 4 (Nov., 1989), pp. 682-686

The relationship between employer size and within firm job mobility is investigated. Larger employers are posited to provide their workers with greater options for career advancement within the firm in an attempt to both protect (and encourage) the relatively higher investments in their workers and to evaluate employee performance. Using microdata on actual levels of internal mobility, direct support is found for the propositions of greater internal mobility in larger establishments.