Knowledge that Transforms

Economists devote considerable effort to the analysis of various forms of nonprice rationing. These analyses generally disregard forces that act to foil rationing schemes. Even with a commodity that seems to be easy to control, however, in a system with extensive rationing experience, nonprice rationing schemes can be circumvented. This thesis is examined for the case of housing distribution in the U.S.S.R. utilizing the data from a survey of recent Soviet emigres. It is shown that administrative rationing of Soviet urban housing is partially replaced by market forces acting usually through the second economy. Copyright 1988 by MIT Press.

Using a simultaneous equations model of wages and union membership, the elasticity of the wage with respect to market concentration is estimated to be approximately 0.2. The estimate uses a large data set and extensive controls to measure concentration's direct effect on the wage, an indirect effect through unionization, and a feedback effect. The indirect effect represents the majority of concentration's effect. Copyright 1988 by MIT Press.

Micro data gathered by the Soviet Interview Project provide one of the first opp ortunities for Western researchers to investigate the determinants of Soviet earnings. The data show that Soviet labor markets operate in many respects like U.S. labor markets, yet institutional differences remain. The most striking institutional impact is that Soviet workers are rewarded and penalized for political behavior external to the firm. As in the U.S., education and experience are rewarded; men earn more than women. However the Soviet pattern of returns to education is different, returns to experience are lower and occupational segregation of women is less important. Copyright 1988 by MIT Press.

This paper highlights the impact of voluntary export restrictions (VERs) on the nonrestricted supplier by investigating the effect of the U.S.-Japan auto VER on the behavior of European producers. Using three independent approaches (supply functions, hedonic regressions, and casual evidence), it shows that European producers raised prices by nearly one third. U.S. welfare loss to Europe ($3.4 billion in 1984) actually exceeded its loss to Japan ($2.4 billion), and the small social loss within the United States. Total annual cost of a job saved in the industry was $181, 000. Copyright 1988 by MIT Press.

Utilizing a Granger causality approach, the authors test whether there has been a causal rela tion between public sector growth and real economic growth rates for the OECD countries. Special emphasis is laid on feedback effects from economic growth to government growth that result from macroeconomic policy. The authors find that government growth has had mixed effects on economic growth rates, positive for some countries and negative f or others. However, for the majority of the OECD countries, there was no discernable impact of government growth on the rate of real econo mic growth. Copyright 1988 by MIT Press.

Using 1980 state Census data, the Gini ratio, Theil index, coefficient of variation, Atkinson measure (four values), and Nelson index as separate measurements of income inequality are regressed with nineteen SES variables traditionally found significant with Gini in past research. The standard deviation of educational attainment is dominant among all independent variables as the strongest predictor of inequality. Mean family income, dominant in prior research, is a distant second in predictiveness. More diversity than commonality is evident among the nineteen SES variables as they predict income inequality measured by the eight different techniques. Copyright 1988 by MIT Press.

Alan L. Tucker, Lallon Pond, The Probability Distribution of Foreign Exchange Price Changes: Tests of Candidate Processes, The Review of Economics and Statistics, Vol. 70, No. 4 (Nov., 1988), pp. 638-647

The strategic groups hypothesis is tested using cluster analysis in -16 selected banking markets and based on portfolio composition in 1978, 1981, and 1984. The results indicate that approximately six strategic groups exist in banking and are stable over time. Strategy choices are similar across markets. Implications of the results are (1) intraindustry profit differences may be due to strategic groups rather than efficiency differences, (2) markets may generally be defined too broadly, (3) investigations for collusion need to focus on homogeneous groups in an industry rather than the whole industry, and (4) there is no simple strategy choice for banks between retail and wholesale banking.

Recent reports of negative capital intensity coefficients in struct ure-performance equations support allegations of gross measurement error in accounting-based measures of economic profitability. This paper explores whether specification errors, rather than measurement errors alone, may explain this anomalous empirical result. Within a simultaneous equations model of capital intensity, cost of capital, and price-cost margins, the author employs Hausman specification tests to demonstrate a negative bias on capital intensity and a positive bias on concentration when one omits firm-specific cost of capital from price-cost margin equations. The roles of cost of capital and capital intensity are derived from formal structure-performance theory. Copyright 1988 by MIT Press.