Knowledge that Transforms

While the rationale for conventional rate-of-return regulation has recently come into question, regulation designed to protect consumers by altering product quality has blossomed. In 1973, for example, eighteen major consumer bills were considered by Congress, among them requirements covering questions of product labelling, unit pricing, and truth in advertising. Currently there are 26 consumer offices scattered throughout the federal government, and over 200 city and state offices. In this paper, I try to explain variance in consumer complaints across different types of products. The tendency of consumers to complain about some products and not others is assumed to depend on some characteristics of both the industry producing that product and the people consuming it. The hypotheses generated are tested using data from the New Haven area. This paper is a first, exploratory study into the economic determinants of consumer complaints.

B ECAUSE many capital assets lose value as they age, it is important both for tax policy and for national income and wealth accounting to be able to measure the pattern of this depreciation. The economic theory of depreciation was first presented by Harold Hotelling in 1925. There was a gap of fifty years before this seminal piece was developed in discussions of depreciation/replacement' rates by Jorgenson (1975) and by Hulten and Wykoff (1976). The desire to add together capital with different characteristics and of different vintages to form an aggregate usable in national wealth accounting stimulated further work in the estimation of depreciation patterns and rates. In 1969 Taubman and Rasche investigated depreciation for office buildings, while in 1970 Wykoff did likewise for automobiles. The purpose of this article is to present a technique for estimating depreciation/replacement rates for the residential stock of housing using data for the United States, 1950-1970, and to compare these estimates with rates calculated by others for specific types of residential housing. This research relies upon the following assumption made explicit in Wykoff (1970): all housing capital, regardless of type, depreciates in the same fashion. Though this assumption is called into question by the results of Wykoff's research for automobiles, it is not formally tested here because of data limitations. In addition, depreciation/replacement rates are calculated in two ways. The first uses benchmarks that reflect the change in price or market value of units over time only, and the second uses benchmarks that reflect this price change plus the cost of maintenance and repair expenditures for the units. In the following section the theory underlying the depreciation/replacement rate estimation technique is presented, and the calculation of benchmarks for housing units of new equivalents, an essential step in the process, is covered in detail. Section C contains comparisons of benchmarks and depreciation/replacement rate estimates, and in section D, conclusions are drawn from the research as a whole.

Jacob S. Dreyer, Andrew Schotter, Power Relationships in the International Monetary Fund: The Consequences of Quota Changes, The Review of Economics and Statistics, Vol. 62, No. 1 (Feb., 1980), pp. 97-106

reported here was supported by funds granted to the Institute for Research on Poverty at the University of Wisconsin-Madison by the Department of Health, Education, and Welfare pursuant to the provisions of the Economic Opportunity Act of 1964. The conclusions expressed herein· are those of the author.. f' This paper empirically investigates the relationship between earnings and capability requirements in the United States. Emphasis is on the need to use data on the capability requirements of an individual's job rather than on an individual's capability endowments. Data are taken from the 1950 and 1960 Censuses and from the Dictionary of Occupational Titles (DOT). Using factor analysis, the DOT data are searched for some underlying basic capabilities; next, implicit capability prices are estimated. Non-:-linearity in the earnings function is analyzed, and price changes over time are studied as well.

T HE Employee Retirement Income Security Act of 1974 (ERISA) has provoked considerable debate about the desirability of various retirement plan provisions and the appropriate role of government in regulating the private pension plan contract. Among the issues debated is the question of who presently pays for private retirement benefits, and who should. An answer to at least the first of these questions is provided by the theory of differences. In competitive markets, a firm that provides pension benefits should pay lower wages than one that does not, thereby offering the same equilibrium value of total compensation to all workers of equal productivity. By the same token, firms that offer pension benefits on relatively desirable terms are expected to offer lower wage rates than firms offering pension benefits on very restricted terms. These simple notions imply that (1) workers pay for their own pensions by accepting lower wages, and (2) government regulation of the content of private pension plans may not significantly alter labor costs or the expected lifetime income of workers. From this perspective, contributions to private pension plans serve the exclusive purpose of enabling individuals to reallocate their resources over time according to their diverse tastes, and do not affect total labor compensation. The primary purpose of this paper is to examine the empirical validity of the equalizing differences hypothesis. By examining the relationship between wages and pension plans, we also hope to improve our ability to account for wage differentials. Contributions to private retirement plans have grown rapidly in recent years-from 1.7% to nearly 4.0% of private sector wages between 1950 and 1979, and coverage has increased from 22% to more than 45% of all private wage and salary workers.' Most previous studies of wage determination have ignored fringe benefits, let alone pension plans.2 But if the growth of pension plans continues and the equalizing differences hypothesis is correct, continuing neglect of pension provisions implies an increasing inability to account for wage differentials across firms, industries, occupations, race, sex, and age, or by the same token, an increasing tendency to attribute such differences to the wrong factors. The paper begins by reviewing the properties of competitive equilibriuni in labor markets in which compensation consists of current and deferred wages.3 Building on this foundation, we demonstrate how the annual cost of a pension plan depends on its various provisions, including vesting, early retirement, normal retirement, and benefit formula. With data on the earnings and pension provisions of individual workers in 133 large firms, we find some support for the equalizing differences hypothesis. We also observe that the extent of equalization diminishes with age, suggesting a redistribution of compensation from younger to older workers.

Mario I. Blejer, Leonardo Leiderman, On the Real Effects of Inflation and Relative-Price Variability: Some Empirical Evidence, The Review of Economics and Statistics, Vol. 62, No. 4 (Nov., 1980), pp. 539-544

A basic notion derived from the observation of a high and increasing degree of manager control in large American corporations (see Berle and Means (1932)) is that managers may have objectives different from the assumed profit maximization motive of owners of firms.' The issue remains unresolved-theoretical work has been of an ad hoc nature (e.g., Monsen and Downs (1965)) and the empirical evidence is mixed (e.g., Kamerschen (1968); Monsen, Chiu, and Cooley (1968); and Larner (1970)). This study conducts an empirical analysis of the relative performance of owner controlled and manager controlled banks. The study is unique in three respects. First, it focuses upon cost and growth as well as profit performance. Second, and more important, it is not confined to the largest 200 or 500 firms as has been the case with most previous studies.2 The sample in this study includes the lead bank of most of the 1,735 bank holding companies in the United States in 1975.3 Third, we test for nonlinearity to determine empirically at what percentage (if any) of ownership performance differences become apparent.

A model for testing all types of relative price inefficiency expands the Averch-Johnson effect and makes it possible to test for absolute price efficiency, which exists if the value of the marginal product for each factor is equated to factor price and implies both cost minimization and production of the optimal quantity of output. Duality theory is used to derive the empirical model using 1973 data for electric utilities. The results indicate that relative and absolute price efficiency were generally not achieved by electric utilities in that year. 36 references, 1 table.

T HE stereotypical view of female employees is that they have relatively weak job attachment and that, in particular, they are especially prone to voluntary job separations. Although this notion is borne out by overall sex differences in aggregative quit rates, this evidence is at best only suggestive since it does not distinguish sex-specific differences in quit behavior from other factors, such as differences in job characteristics and wage rates.' The principal study to date of sex differences in worker quitting is that of Barnes and Jones (1974), who analyzed differences in aggregative quit rates by sex. Although their findings were consistent with the view that females are more prone to quitting, the analysis was restricted to observations for only 19 two-digit industries for each sex so that there was not sufficient information in the sample to analyze many important patterns of interest.2 Quit rate studies that do not focus specifically on female quit behavior typically have included a variable reflecting the percentage of workers of a particular sex in the industry. While industries with larger percentages of female employees generally have been associated with higher levels of quitting,3 these findings for samples of 47-52 two-digit industries are somewhat different from those found in other samples. Indeed, analysis of 95 3-digit industries by Viscusi (1979) reveals no significant sex effect on aggregative quit behavior. In this paper, I will utilize data for a large sample of individuals in an attempt to resolve the ambiguities in these earlier findings. The most familiar economic motivation underlying potential male-female quit differences is that women often leave the labor market to bear and raise children. Moreover, since wives typically earn lower wage rates than do their spouses, they may serve as secondary earners, entering the labor force during periods of temporary economic needs and exiting thereafter. In addition, family migration decisions, such as those analyzed by Mincer (1978), may lead to quits by wives whose husbands have been transferred to new locales. There also may be important differences in the lifetime employment choice pattern related to the role of quitting as part of an adaptive choice process.4 To the extent that women have less precise notions of their prospects for advancement and their working conditions, such as the presence of co-worker discrimination, they will be more likely to use the initial period of employment as a period of experimentation and then quit if their experiences are sufficiently unfavorable. An offsetting influence is the fact that males have a greater expected future period of work so that learninginduced quit behavior may offer greater potential gains even though the informational content of the on-the-job experiences may be less.5 Finally, in situations in which workers are unable to voice their complaints effectively and have them settled through grievance procedures, they will adopt an alternative economic response of exiting from the undesirable job context.6 CoReceived for publication October 23, 1978. Revision accepted for publication July 25, 1979. * Northwestern University and Council on Wage and Price Stability. Helpful comments were provided by Gregory M. Duncan, an anonymous referee, and members of the Northwestern Labor Seminar. John Link performed his usual excellent job as programmer for this research. I The importance of quit behavior to analyses of sex differences in employment and the inconclusive nature of existing studies is discussed by Reynolds (1978), especially on page 167, and by Pigors and Myers (1973). 2 Their principal regressions included only two age variables and an industry wage variable. Inclusion of a worker education variable knocked out the wage effect for males. See footnote 16 on page 447 of Barnes and Jones (1974). 3 See, for example, Burton (1969), Burton and Parker (1969), Parsons (1972), Pencavel (1970), and Stoikov and Raimon (1968) for aggregative results of this type. The signs for the worker sex variable are sometimes mixed or statistically insignificant.

O NE of the issues in the monetarist-fiscalist debate is whether it is more appropriate to obtain estimates of monetary and fiscal multipliers from structural models or reduced form equations. In recent years, Keynesians have challenged the results from reduced form equations on econometric grounds. They have argued that reduced form estimates are subject to bias if any of the following conditions exist: