Knowledge that Transforms

The dramatic decline in the demand for union representation among nonunion workers over the last decade is investigated using data on worker preferences for union representation from four surveys conducted in 1977, 1980, 1982, and 1984. Relatively little of the decline can be accounted for by shifts in labor force structure. However, virtually all of the decline is correlated with an increase in the satisfaction of nonunion workers with their jobs and a decline in nonunion workers ' beliefs that unions are able to improve wages and working conditions.

A central question in development economics is, how can we account for differences in the levels of income and the rates of growth between the developed and less developed economies?

Self-employment rates and incomes differ significantly by race. We show that these differentials arise in markets with consumer discrimination and incomplete information about the price of the good and the race of the seller. Equilibrium income distributions have two properties: mean black incomes are lower than mean white incomes, and the returns to ability are lower for black than for white sellers. Able blacks, therefore, are less likely to selfselect into the self-employment sector than able whites. Using the 1980 Census data, we find that observed differences in the self-employment income distributions are consistent with the theoretical predictions.

This paper shows that the existing estimates of prewar gross national product exaggerate the size of cyclical fluctuations. The source of the exaggeration is that the original Kuznets estimates are based on the assumption that GNP moves one-for-one with commodity output valued at producer prices. New estimates of GNP for 1869-1918 are derived using the estimated aggregate relationship between GNP and commodity output for the interwar and postwar eras. The new estimates of GNP indicate that the business cycle is only slightly more severe in the pre-Worid War I era than in the post-World War II era.

This paper analyzes the effects of governeent debt and income taxes on consumption and saving in a world of infinitely-lived households having uncertain and heterogeneous incomes. The special structure of the model allows exact aggregation across households despite incomplete mmrkets. The effects of government debt are shown to be substantial, roughly comparable to those resulting from finite horizons, and crucially dependent on the length of time until the debt is repaid. Also, anticipated changes in taxes are shown to cause anticipated changes in consumption. Finally, an index of fiscal stance is derived.

The authors develop a multicountry, dynamic general equilibrium model of product innovation and international trade to study the creation of comparative advantage through R$50D and the evolution of world trade over time. In their model, firms must incur resource costs to introduce new products, and forward-looking potential producers conduct R$50D and enter the product market whenever profit opportunities exist. Trade has both intraindustry and interindustry components, and the different incentives that face agents in different countries for investment and savings decisions give rise to intertemporal trade. The authors derive results on the dynamics of trade patterns and trade volume and on the temporal emergence of multinational corporations. Copyright 1989 by University of Chicago Press.

Liberal political philosophy, represented classically by John Locke and today by libertarians, defends great inequality of economic outcome on the basis that people own themselves and are entitled to establish private property in the external world by virtue of that self-ownership. Contemporary nonlibertarian political philosophers, such as John Rawls and Ronald Dworkin, achieve their relatively egalitarian conclusion by effectively denying self-ownership as a premise. An alternative challenge to liberalism, which does not take the radical starting point of denying self-ownership, is to declare that while certain rights to benefit by virtue of superior skill should be protected (a degree of self-ownership), productive assets in the external world be viewed as publicly owned and not privately appropriable. What allocation mechanisms on a space of possible economies satisfy axioms that are necessary to guarantee both private ownership of self and public or joint ownership of the external world? We propose an axiomatic method for modeling problems in political philosophy of this sort and answer the question posed for a simple model. The result shows that the degree of inequality defended by neo-Lockeanism can be challenged without denying, a priori, self-ownership, its relatively attractive postulate.

Interest-bearing checkable deposits are examined to test whether they should be included in measures of the U.S. money stock. Both Divisia and traditional simple-sum aggregates are constructed on the basis of tests for weak separability in a model of the demand for financial assets. Using nonparametric demand analysis, we find that several groups of assets are compatible with aggregation theory. We find empirical support for a narrow measure consisting of the components of current MIA. In tests based on a St. Louis equation and in terms of controllability, a Divisia aggregate performs better than the simple-sum MIA measure.

The authors consider six explanations for the positive relationship between employer size and wages: large employers (1) hire higher-quality workers, (2) offer inferior working conditions, (3) make more use of high wages to forestall unionization, (4) have more ability to pay high wages, (5) face smaller pools of applicants relative to vacancies, and (6) are less able to monitor their workers. They find some support for the first of these, but there remains a significant wage premium for those working for large employers. Copyright 1989 by University of Chicago Press.

Few sovereign debtors have repudiated their obligations entirely. But despite the significant sanctions at the disposal of lenders, many borrowers have been able to consistently negotiate for reduced repayments. This paper presents a model of the on-going bargaining process that determines repayment levels.