Knowledge that Transforms

A variance components model explains wage dispersion with a specific version of generalized least squares. The estimation preserves individual data while examining the influence of union penetration on dispersion in both the union and nonunion sectors. Controlling for both individual and industry characteristics and for the endogeneity of wages, union penetration correlates strongly with reduced dispersion in the union sector but not in the nonunion sector. A decomposition reveals the relative importance of the influences of union penetration and of union membership.

Predictions of economic theory for the equilibrium condition of workers in three labor markets with differing working hours constraints are tested. Original data allow the marginal rate of substitution of income for leisure to be estimated directly. In two markets, working hours constraints resulting from high fixed employment costs and the overtime premium, respectively, cause workers to desire fewer and more hours. In the third market (agricultural labor), constraint factors are absent. The predicted relationship between the wage and the marginal rate of substitution of income for leisure holds in each case. Implications for agency and human capital models are investigated. Additionally, in the agricultural case, preferences and equilibria are indistinguishable for legal and illegal workers.

The relationships between factor use and scale and technological change and scale are emphasized in a translog cost function analysis of technological development in four sectors of Canadian manufacturing, 1900-29. By paying particular attention to the role of electrification in this technological development, the major findings are that the increased use of electricity was not in general scale-dependent and that electrification may have been a factor in increasing the relative productivity of smaller-scale units over the period. A hypothesis that states that technical change is partially induced by increased scale is, however, confirmed.

In order to understand the relationship between market structure and the risk of innovation, this paper proposes a synthesis between the capital asset pricing model and simple models of industrial organization. The theoretical section of the paper discusses the real determinants of R&D riskiness, finding that several unique features of R&D assets may influence their systematic risk, including their strategic nature and random arrival as well as the firm's industry context. The empirical results suggest that there is a considerable systematic risk premium associated with R&D that can be partially offset by firm size and market concentration.

This paper clarifies the differences in the alternative estimators of the error covariance matrix X in the SUR model with unequal numbers of observations. It identifies a sample statistic which represents their essential differences and hence is a useful guide for the choice of an estimator in practice. The paper also presents an alternative estimator of E based on the specification in Telser (1964).

Econometric analysis often addresses model misspecification due to the improper pooling of observations. One major problem in testing for improper pooling is the requirement that alternative stratifications be obtained from others through sets of restrictions (i.e., that they be nested stratifications), thus eliminating a large class of alternative non-nested stratifications. We propose that non-nested tests can be used to compare non-nested stratifications. We formally define the econometric problem, and show the applicability of the J, JA, Cox and non-nested F tests. We then use the four tests to compare spatial stratifications in a model of a house price determination.

The effects of output qualities on costs of trucking firms could be evaluated at a given number of ton-kilometers or at a given number of shipments. This note shows that false interpretations of potential output qualities effects could occur when these effects are evaluated at a given number of ton-kilometers.

This study evaluates the effectiveness of a radon risk communication program based on how the estimated value of additional information varies across the six types of descriptive materials randomly assigned to a panel of homeowners participating in a radon utility model estimated with probit from respondents' answers to a contingent behavior question asking if they would purchase at a one-time price the services of a licensed technician to analyze their radon problems. The findings indicate that the information materials used most frequently by states and testing companies to explain radon's risk are the least effective of the six considered.

In addition to generating housing services, owner-occupied housing units constitute a lumpy, risky asset in household portfolios. Analysis of these dual consumption/investment roles suggests the permanent wealth budget constraint in housing demand models should be decomposed into permanent returns from human capital and current net worth. For young owners, current net worth is hypothesized to be the dominant wealth component determining the quantity of housing demanded. Using a Canadian microdata base, evidence is found that net worth does provide both greater explanatory power and higher elasticities than labor earnings.