Knowledge that Transforms

The employment and earnings effects of the minimum wage are estimated by parameterizing a hypothesized relationship between underlying market employment and wage relationships versus observed wage and employment distributions in the presence of a legislated minimum. If there had been no minimum during the 1973-78 period, we estimate that employment among out-of-school men 16-24 would have been approximately 4% higher than it was. Among young men 16-19 employment would have been about 7% higher; among those 20-24, 2% higher. Employment among black youth 16-24 would have been almost 6% higher than it was, compared with somewhat less than 4% for white youth. Although it is sometimes argued that the adverse employment effects of the minimum are offset by increased earnings, we find virtually no earnings effect. Had the minimum not been raised over the 1973-78 period, inflation would have greatly moderated the adverse employment effects of the minimum, with approximately two-thirds of the potential employment gains from elimination of the minimum attained. The weight of our evidence is inconsistent with a general increase in youth wage rates with increases in the real minimum. Our findings support the hypothesis that the effects of the minimum are concentrated on youth with subminimum market wage rates.

Although the ratio of gross fixed nonresidential investment to GNP has decreased very little since the late 1960's, the corresponding net investment ratio declined by nearly 40 percent between the second half of the l960's and the second half of the 1970's. Four-fifths of this decline was due to the increased ratio of depreciation to GNP and only one-fifth to the decreased ratio of gross investment to GNP. The increased ratio of depreciation to GNP was in turn due in equal amounts to the higher ratio of capital to GNP and to the higher rate of depreciation. Nearly half of the higher depreciation rate was due to the increased rate of depreciation of equipment and nearly half to the increased share of equipment in the capital stock.

Controversies in term-structure theory center around the existence and variability of term premia in securities yields. In this paper, the term premium on a default-free n-period bond is defined as the difference between its observable yield to maturity and the average expected per-annum rate of return on an n-period strip of rollover investments in one-period bonds. To test alternative term-structure theories without introducing ex post proxies for expectational variables, this paper uses a set of cross-section interest- rate forecasts collected jointly with Burton Malkiel of Princeton University from a population of large institutional lenders at four different phases of a single interest-rate cycle. Statistical tests strongly confirm the existence of nonzero term premia at each survey date, thereby rejecting the pureexpectations theory of the term structure. Additional tests are unable to reject restrictions implied by the liquidity-premium hypothesis that term premia should be positive and increase with maturity. Finally, contrary to the martingale hypothesis, ex ante term-premium data vary significantly over time and show a positive association with the level of interest rates.

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Migration often occurs more than once in an individual's lifetime. Many people may move back to the location where they were born after a stay in another area, or they may move on to yet another new location. In this paper the migrant's location-specific capital and information costs are examined, and empirical findings for the United States are presented and discussed.

For a commonly occurring pattern of missing data, estimators of regression coefficients are derived by a non-likelihood method. The small-sample properties are investigated for the case of normality assumptions. The estimators are shown to be unbiased, exact small-sample variance formulae are derived, comparisons are made with ordinary least-squares estimators and it is demonstrated that the estimators can be more efficient than maximum-likelihood estimators in small samples.

Earlier work on aggregate production functions with capital-embodied technology showed that, when firms employ more than one capital type, conditions for partial capital ("equipment") aggregation and for total capital aggregation differ. This paper studies simultaneously existing partial and total aggregates. Existence of a total and one partial aggregate implies existence of the complementary partial aggregate. However, simultaneous existence requires each firm's production function to be strongly separable in its capital subaggregates. The use of subaggregates like "equipment" and "plant" together with an aggregate "capital" thus implies that "plant" and "equipment" are perfect substitutes and is highly questionable.

The hypothesis of non-jointness in input quantities (separate production functions) is well-known, and it plays an important role in many areas of economics. In this paper we define three additional forms of non-jointness which have received little or no attention in the literature, and which might be relevant for the firm as well as for the representation of the aggregate technology. We characterize all forms of non-jointness in terms of variable profit and joint cost functions. This yields a number of restrictions which are all testable empirically.