Knowledge that Transforms

The effects of tax policy on agricultural investment are investigated by estimating a dynamic interrelated input demand system. Net investment is specified to give rise to increasing internal costs of adjustment, resulting in capital inputs being quasi-fixed. The system of demand equations is derived by incorporating a quadratic normalized restricted cost function into a long-run dynamic optimization framework. Copyright 1991 by MIT Press.

This paper analyzes changes in child-care arrangements of a sample of children from the Youth Cohort of the National Longitudinal Surveys over the first three years of life. The analysis indicates that turnover in child-care arrangements is surprisingly low among this sample and is more common among families of higher socioeconomic status. Child-care turnover is positively correlated with mothers' employment turnover, but is not correlated with changes in mothers' marital status or additional births. Turnover in child-care arrangements is highly correlated over time, due mainly to the effects of observed variables and unobserved characteristics of the mothers. Copyright 1991 by MIT Press.

The conclusions of policy-oriented market studies often hinge upon the size of an estimated demand elasticity. Few of the researchers who have estimated such elasticities have utilized a variable designed to measure the subjective concept of "quality." If quality both significantly affects the demand for a heterogeneous good and is positively correlated with price, omitting quality from a demand regression will lead to a downward bias in the estimated price elasticity. Using Levinsohn's (1988) model of the automobile market as a framework, this note shows that including quality variables can increase the model's estimated price elasticity by more than 80 percent. Copyright 1991 by MIT Press.

Steven G. Craig, Janet E. Kohlhase, David H. Papell, Chaos Theory and Microeconomics: An Application to Model Specification and Hedonic Estimation, The Review of Economics and Statistics, Vol. 73, No. 2 (May, 1991), pp. 208-215

The relation of several incentive schemes to productivity is studied, with a particular emphasis on the effects and determinants of dismissals. Dismissals turn out to be positively, but in a nonlinear way, associated with productivity. Similarly, profit-sharing raises productivity. Wages and piece-rates are insignificant. Profit-sharing decreases the number of dismissals made by firms. Copyright 1991 by MIT Press.

Price V. Fishback, John H. Baskin, Narrowing the Black-White Gap in Child Literacy in 1910: The Roles of School Inputs and Family Inputs, The Review of Economics and Statistics, Vol. 73, No. 4 (Nov., 1991), pp. 725-728

Recently developed effort regulation models argue that labor markets are segmented because of differences in the technology of supervision across firms. primary jobs pay above market clearing wages because these jobs are difficult to monitor. Secondary jobs, in contrast, pose no monitoring difficulties and therefore pay a market clearing wage. If, as the literature suggests, increases in employer size make supervision more difficult, we should observe that wages increase with employer size in primary jobs but not in secondary jobs. We test this hypothesis using a switching regression model. We find evidence of an employer size wage effect in both primary and secondary labor markets. However, consistent with the prediction of effort control models, the size effect on wages is considerably larger in primary than secondary jobs.

Despite considerable empirical research, a debate still rages about the relative importance of tenure and experience in determining wages given the existence of unobserved heterogeneity. Using a data set well suited to this problem, the author finds after correcting for unobserved heterogeneity that tenure increases wages only in the first several years of employment. The accumulated effect of general labor-market experience increases wages substantially over the career. This evidence suggests that specific human capital accumulation is relatively less important than some might believe. This result is robust to different estimation techniques that have been suggested in the literature. Copyright 1991 by MIT Press.

Disaggregated import-demand elasticity estimates based on import unit-value indexes are used in virtually all trade policy simulation models. However, unit-value indexes have been criticized especially by Irving B. Kravis and Robert E. Lipsey (1974). To examine the effect of using unit-value indexes on estimates of disaggregated import-demand elasticities, this paper compares regression results using unit-value indexes with results using U.S. Bureau of Labor Statistics import-price indexes for several detailed trade categories based on quarterly data for 1978-88. Results show that using unit-value indexes does not greatly affect estimated import-demand elasticities. Copyright 1991 by MIT Press.

This paper evaluates the performance of a monetary aggregate that is constructed from principles of economic and index number theory. Results from tests for weak separability indicate that wholesale deposits should not be aggregated with other U.K. financial assets; they currently are included, however, in broad monetary aggregates published by the Bank of England. Financial asset groupings passing the weak separability tests then were aggregated using both simple-sum and Divisia weights. In each case, the Divisia aggregates were more closely related to the growth of nominal GDP and had stable demand for money functions. Copyright 1991 by MIT Press. (This abstract was borrowed from another version of this item.)