M. W. Jones-Lee, A Note on a Property of the Inverse of a Bordered Matrix and Its Implication for the Theory of Portfolio Selection, The Journal of Financial and Quantitative Analysis, Vol. 9, No. 6 (Dec., 1974), pp. 1081-1087

T ESTED with regional data for the United States, the neoclassical growth model has yielded inconsistent results. Borts and Stein (1964, chapter 3) employed a simple growth model relating interregional factor movements to factor price differentials, but found little evidence of responsiveness. In a recent paper Smith (1973) found such a model consistent with the long-run factor mobility experience of states. Since a similar model was employed in both studies, the contrasting results may be ascribed to the use of inappropriate data in the test of the model of Borts and Stein, and/or inadequate model specification. They tested their model on the nonagricultural sector of each state, while Smith's model is tested on aggregate state data. Use of data on the nonagricultural sector of each state embodied the implicit assumption that capital and labor move only between states from one nonagricultural sector to another, and ignored the possibility of intersectoral factor movements. Smith avoided this potential problem by aggregating each state's output to a single sector. Thus, only interstate factor movements were relevant. In this paper, both intersectoral (within states) and interstate factor movements are considered. Factor movements affect the growth rate of a sector's capital-labor ratio, which determines the growth rate of the wage level.

Reviews the book "Self-Instructional Guide to Federal Income Taxation," by Albert J. Schneider.

Journal Article General Equilibrium with a Replenishable Natural Resource Get access Vernon L. Smith Vernon L. Smith California Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 41, Issue 5, December 1974, Pages 105–115, https://doi.org/10.2307/2296374 Published: 01 December 1974

Most studies of the demand for cars are designed to explain new purchases and assume that purchases are divided into net investment and replacement. Replacement is invariably identified with stock depletion, defined either as scrapping (determined by the length of life of a car) or as depreciation (determined by the decline in the price of a used car with age). Implicit in these theories is the assumption that the elasticity of substitution between the new and used car markets is rather high. This assumption is necessary to ensure that the price mechanism will induce consumers to buy new cars to make good the stock depleted by the scrapping or depreciation of used cars. Most empirical evidence indicates that this assumption is not justified and that new and used cars are poor substitutes, e.g. [1], [8] and [6]. Since the low degree of substitution between the two markets insulates new car purchases from the factors that influence the stock of used cars, stock depletion cannot explain replacement purchases of new cars. In this note an alternative approach will be suggested and its use illustrated by the case of new car sales in the US. The advantages of this approach are: (1) replacement is directly observable; (2) the assumption of perfect substitution between new and used car services is not necessary; and (3) it may help account for a series of implausible estimates of the depreciation rate that have been obtained from more orthodox models. It is generally accepted in the US automobile industry that new and used cars are bought by distinct groups. For instance, White in a recent study of the industry [6] says: New cars are not bought by a random selection of car owners but, instead, tend to be bought by a small group who buy new cars comparatively frequently and sell their used cars to the general public to hold. As an approximation, therefore, we can split buyers into two groups, those who buy their car new and those who buy it used, treating these groups as distinct. The demand of the new car buying group is primarily for replacement, since between 80 and 90 per cent of them trade-in or sell an old car when buying a new one; the average time from purchase to resale is between two and three years. This leads us to a definition of replacement as the process by which a consumer disposes of a car bought i years ago and purchases a new one. The existence of a well-developed second-hand market confirms that the replacement interval, i, is considerably shorter than the lifetime of a car, so that replacement does not equal scrapping. This replacement interval will vary between household and we shall observe a distribution of intervals, say c(i), which will determine the lag distribution generating replacement, U, from past purchases, Q; i.e.

Several titles reflecting different approaches to our subject matter were considered for the paper. An historical but somewhat pedantic approach to the teaching of investments might have been titled “Pedagogical Developments in Investments: Past, Present, and Future.” Another possibility was “Sex and the Single Investor, ” a title which probably would have attracted a larger audience. “Beat the Dealer Versus Beat the Market” might well have been an appropriate title in view of our presence here in Las Vegas and also because of recent experience in the securities markets. We finally decided on simply “A Portfolio Analysis of the Teaching of Investments, ” because this seems to better capture the essence of our viewpoint.

This paper presents estimates of the concentration of personal wealth in the United States from 1922 to 1969. These estimates lead us to conclude that the distribution of wealth (1) became significantly more equal in the 1930's and early 1940's, two periods of massive government intervention in the marketplace, and (2) has remained essentially unchanged since 1945.1 In what follows, we compare the wealth held by the richest 1.0 and 0.5 percent of the population to that of all persons. The wealth of the richest 1.0 and 0.5 percent was estimated by the estate multiplier technique.2 The wealth of all persons was derived from national balance sheets.3 The estimates presented here for the period before 1953 were developed by Robert J. Lampman using highly aggregated Internal Revenue Service (IRS) data. For 1953 and 1958 we use detailed estimates (from special IRS tabulations) by Lampman and Smith, modified slightly to take account of current knowledge. Estimates for 1962, 1965, and 1969 are new detailed estimates developed by the authors using microdata files of estate tax returns prepared by the IRS for its routine publications. Here we focus on the years since 1953. Information available from estate tax returns varies from year to year, so a number of adjustments were made to bring the estimates for individual years into conceptual alignment with one another. The alignment problem was exacerbated because the IRS has destroyed tapes of returns filed before 1963, leaving only Lampman's and Smith's printed tabulations for 1953 and 1958.4 It was impractical to reestimate the distributions for 1953 and 1958 by better methods based on current knowledge. Consequently, the estimates for 1962, 1965, and 1969 were made consistent with those for 1953 and 1958 * The Urban Institute and the Pennsylvania State University. The work reported here is part of the Urban Institute's research program on income and wealth distribution. The support of the National Science Foundation is gratefully acknowledged. 1 We wish to make clear that our concern is with temporal change and that we have sacrificed best estimates for individual years to achieve consistency over the time series. Individual figures have a downward bias of 10 to 15 percent from our best estimates of concentration. (Best estimates for 1969 may be found in Smith; similar estimates for other years will appear later.) 2 Detailed descriptions of the methodology and attendant problems can be found in Smith and Staunton Calvert, Robert J. Lampman, and Smith. I National balance sheets were constructed for a person's sector using data supplied by the Board of Governors of the Federal Reserve System. Helen Stone Tice did the basic work on these special sector balance sheets. Smith provides a detailed description of the balance sheet. I A further problem resulted from the fact that the IRS erased the age field from the 1965 tape. This was most unfortunate because of all years for which the IRS has coded estate tax returns, 1965 had the most detailed classification of information. The erased data was restored by a stochastic process which took into account the relationship between age and other characteristics observable in the files for 1962 and 1969.