Knowledge that Transforms

Narayana R. Kocherlakota, Kei-Mu Yi, A Simple Time Series Test of Endogenous vs. Exogenous Growth Models: An Application to the United States, The Review of Economics and Statistics, Vol. 78, No. 1 (Feb., 1996), pp. 126-134

Thomas J. Hoerger, Gabriel A. Picone, Frank A. Sloan, Public Subsidies, Private Provision of Care and Living Arrangements of the Elderly, The Review of Economics and Statistics, Vol. 78, No. 3 (Aug., 1996), pp. 428-440

The determinants of the decision by Japanese firms to set up manufacturing plants in Southeast Asia, Europe and North America are analyzed using micro-data on the behavior of firms in the electronics industry. While firm-specific intangible assets based on R&D and marketing efforts are positively related to the decision to invest in Europe and North America, investment in Southeast Asia is mainly related to human resources and driven by interfirm ties within horizontal and vertical business groups. The empirical results suggest that membership of horizontal 'keiretsu' relaxes liquidity constraints, while the manufacturing networks of horizontal and vertical 'keiretsu' in Southeast Asia facilitate the establishment of manufacturing plants by member firms.

This paper investigates whether the forty-eight contiguous U.S. states converge and, if so, whether convergence is absolute. Economies are shown to converge if, and only if, technology is stationary around a common trend. If convergence does occur, it is unlikely to be absolute unless the economy fixed effects in technology, capital's share, and the rental rate vanish. Examining data on the level of technology, capital's share, and the rental rate provides strong evidence that the continuous U.S. states converge rapidly to levels that are far apart. The rapidity of convergence suggests that factors and technology are highly mobile across the contiguous U.S. states.

In this paper, we use micro panel data to examine the effects of oil price changes on employment and real wages, at the aggregate and industry levels.We also measure differences in the employment and wage responses for workers differentiated on the basis of skill level.We find that oil price increases result in a substantial decline in real wages for all workers, but raise the relative wage of skilled workers.The use of panel data econometric techniques to control for unobserved heterogeneity is essential to uncover this result, which is completely hidden in OLS estimates.We find that changes in oil prices induce changes in employment shares and relative wages across industries.However, we find little evidence that oil price changes cause labor to consistently flow into those sectors with relative wage increases.

In this paper, the authors examine the role of parental education in the human capital production function by estimating the effects of parental education on the education profile of wages. The analysis uses sibling pairs from the Panel Study of Income Dynamics and the National Longitudinal Surveys of Labor Market Experience of Young Men and Young Women. The authors obtained mixed evidence on whether parental education raises the return to education.

James Heckman, Anne Layne-Farrar, Petra Todd, Human Capital Pricing Equations with an Application to Estimating the Effect of Schooling Quality on Earnings, The Review of Economics and Statistics, Vol. 78, No. 4 (Nov., 1996), pp. 562-610

The intraindustry trade literature emphasizes nonhomothetic preferences and incomes as important determinants of aggregate demand and trade patterns. The authors provide evidence for such preferences, particularly that the structure of income-driven demand shifts is related to indices of Linder-type product characteristics, and that income distribution is a significant factor in determining aggregate expenditures. These results imply that, as general income levels rise, the relative volume of trade in manufactured consumer goods should rise, and the total volume of trade should rise, independent of changes in the intercountry difference between income levels.

Robert J. Shiller, Fumiko Kon-Ya, Yoshiro Tsutsui, Why Did the Nikkei Crash? Expanding the Scope of Expectations Data Collection, The Review of Economics and Statistics, Vol. 78, No. 1 (Feb., 1996), pp. 156-164

This paper investigates whether consumer durables are important for the generation and propagation of business cycles. The author constructs a two-sector model that succeeds in generating business cycles that mimic empirical patterns of cross-sector volatility and comovement. She finds that half the relatively higher volatility associated with the durable-goods sector is due to higher volatility of shocks hitting this sector, with the other half due to endogenous responses, notably the investment accelerator. Nevertheless, this model does not have stronger internal propagation than the one-sector model. Further, incorporating durable consumer goods has little effect on the behavior of other macroeconomic variables.