Knowledge that Transforms

Joel Slemrod, Are Estimated Tax Elasticities Really Just Tax Evasion Elasticities? The Case of Charitable Contributions, The Review of Economics and Statistics, Vol. 71, No. 3 (Aug., 1989), pp. 517-522

A model of consumption of residential energy in dwellings is developed, distinguishing between attributes of housing that provide direct benefits to consumers and attributes that serve as inputs in the production of final goods, for example, the thermal comfort of dwellings. Empirical estimates are made of the mode, based upon the Annual Housing Survey, and the results are used to calculate the effects of changes in energy prices on the consumption of housing, residential energy, and other goods. The analysis suggests that the adjustment process within the housing market permits a great deal of substitution in response to energy price changes. Copyright 1989 by MIT Press.

The authors conduct tests to gain insight into the empirical relevance of the proposition that factor prices converge as trade expands. The test results support the proposition of factor price convergence in sixteen OECD countries during the 1961-84 period. Regression analyses support the view that trade openness has been the most significant factor influencing wage variations. This paper also distinguishes between "high wage" and "low wage" countries. Pooled ordinary least squares estimates indicate that Canada, the United States, Denmark, West Germany, the Netherlands, and Sweden are "high wage" and Japan, New Zealand, Austria, Belgium, Finland, France, Ireland, Norway, Switzerland, and the United Kingdom are "low wage" countries. Further results using the Within estimations technique are provided. Copyright 1989 by MIT Press.

Measuring the labor-force response of a woman to changes in her husband's earnings is the goal of this dynamic model. Allowing for uncertainty, the model modifies the constant shadow price of initial assests framework so that the shadow price varies over time. It is shown that the change in a woman's labor supply is related to the deviation of the husband's actual work hours from the expected amount. The estimation indicates that the largest response to the loss of husband's income occurs with a divorce or separation; smaller effects are noted for widowhood, and husband's unexpected unemployment or health change. Copyright 1989 by MIT Press.

This study examines the determinants of the duration of U.S. union contracts using a longitudinal contract data base. Support is found for the hypotheses that (1) inflation uncertainty reduces contract length and that (2) greater contracting costs, as proxied by a strike variable and by previous duration, increase contract length. In addition, contract duration is found to be greater for indexed contracts, to be procyclical, and to have increased over the sample period. Copyright 1989 by MIT Press.

The authors find evidence from Australian time-series data supporting two hypotheses about the determination of labor absence. First, labor absence modeled in a utility-maximizing framework that stresses the opportunity cost of labor absence receives considerable support from the data. Variables that change the slope and/or shift the budget constraint facing workers affect labor absence. Secondly, the authors find tentative evidence that coercive or difficult work environments, which apparently affect job satisfaction, adversely affect labor absence. In particular, it appears that labor absence is a leading indicator of a deteriorating industrial relations environment characterized by increased industrial disputation. Copyright 1989 by MIT Press.

A new specification of health-insurance-plan choice is developed that uses a nonparametric functional form for the loss function used to evaluate insurance premiums and uncertain out-of-pocket expenditure. The approach is implemented on data resulting from one firm's implementation of a new health plan with three distinct health insurance options. Health expenditure differences greater than 500 percent are observed, indicating extremely strong biased selection. Plan choices are consistent with a convex loss function for small losses, which suggests that consumers underweight high-loss/low-probability outcomes relative to low-loss/high-probability ones. Copyright 1989 by MIT Press.

A model that includes bounded price variation and rational expectations by producers is estimated for the U.S. corn market. The resulting model specification is highly nonlinear though, since the probability of market equilibrium must be determined endogenously. Unlike previous research, the cross-equation restrictions implied by the rational expectations hypothesis are incorporated in the bounded prices model by using Fair and Taylor's (1983) procedure for obtaining maximum likelihood estimates of nonlinear rational expectations models. The resulting model is compared against a standard equilibrium model with naive expectations. The results show the bounded prices model is a superior specification. Copyright 1989 by MIT Press.

In recent months, the governors of several states have suffered major political embarrassments because actual revenues fell, substantially short of the predictions in their respective budgets. Such episodes focus attention on the question of whether states do a good " job of forecasting revenues. In modern economics, forecasts are evaluated on the basis of whether or not they are rational " do the forecasts optimal] y incorporate all information that is available at the tune they are made? This paper dr:vel ops a method for testing the rat i.onal t.y of state revenue forecasts, and applies it. to the aria lysi s of data from New Jersey, Massachusetts, arid Maryland. (ne of our main findtri'i; u,; that in all three states, the I orerats of own revenues are yystematically biased dowriward