Knowledge that Transforms

This study employs a stochastic model developed by G. Udny Yule and Herbert A. Simon as the probability mechanism underlying the consumer's choice of artistic products and predicts that artistic outputs will be concentrated among a few lucky individuals. We find that the probability distribution implied by the stochastic model provides an excellent description of the empirical data in the popular music industry, suggesting that the stochastic model may represent the process generating the superstar phenomenon. Because the stochastic model does not require differential talents among individuals, our empirical results support the notion that the superstar phenomenon could exist among individuals with equal talent. Copyright 1994 by MIT Press.

Yannis M. Ioannides, Stuart S. Rosenthal, Estimating the Consumption and Investment Demands for Housing and Their Effect on Housing Tenure Status, The Review of Economics and Statistics, Vol. 76, No. 1 (Feb., 1994), pp. 127-141

The authors extend Daniel McFadden's (1989) method of simulated moments to approximating efficient estimators in general estimation problems. The general approach applies a simulated bias correction to an approximation of the efficient score. They discuss a general trade-off in estimator inefficiency between bias correction and moment approximation. Copyright 1994 by MIT Press.

Julian M. Alston, Kenneth A. Foster, Richard D. Gree, Estimating Elasticities with the Linear Approximate Almost Ideal Demand System: Some Monte Carlo Results, The Review of Economics and Statistics, Vol. 76, No. 2 (May, 1994), pp. 351-356

Andrew D. Foster, Mark R. Rosenzweig, A Test for Moral Hazard in the Labor Market: Contractual Arrangements, Effort, and Health, The Review of Economics and Statistics, Vol. 76, No. 2 (May, 1994), pp. 213-227

This paper uses 1979-85 data on women from the National Longitudinal Survey of Youth to examine the eco-nomic, sociological, and institutional antecedents of adolescent childbearing and high school completion and to analyze the effect of early childbearing on school completion. Fertility and school completion are modeled as dichotomous outcomes, and their determinants are estimated using a bivariate probit specification. The paper finds evidence that adolescent childbearing is an endogenous determinant of high school completion and that failing to account for this endogeneity leads to an over-estimate of the schooling consequences of early childbearing.

Amos Golan, George Judge, Sherman Robinson, Recovering Information from Incomplete or Partial Multisectoral Economic Data, The Review of Economics and Statistics, Vol. 76, No. 3 (Aug., 1994), pp. 541-549

M. Ishaq Nadiri, Theofanis P. Mamuneas, The Effects of Public Infrastructure and R & D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries, The Review of Economics and Statistics, Vol. 76, No. 1 (Feb., 1994), pp. 22-37

This paper analyzes the influence of political systems and rights in patterns of agricultural protection across commodities, countries, and over time. Four political systems and a qualitative index of political rights account for differences in political institutions. The analysis incorporates the effects of development, of constraints on tax collection feasibility, and of comparative advantages and terms of trade. Pluralistic systems are associated with higher agricultural protection levels, although in a nonlinear fashion. Access to pluralism appears to be important, although further democratization partly dissipates protection. Copyright 1994 by MIT Press.

Catastrophic medical expenses are an important economic risk facing the elderly. Little is known about the persistence of such out-of-pocket medical costs. We measure the time-series property of medical costs using information on medical deductions from a panel of tax returns. During the period of analysis, 1968-73, taxpayers could deduct medical expenses above 3 percent of income. We correct for the resulting censoring bias using multivariate Tobit estimated with a variant of the smoothed simulated maximum likelihood (SSML) method. The data suggest that the burden of out-of-pocket medical expenses is substantially larger for lower income families. Furthermore, the estimated coefficients suggest substantial time-persistence in out-of-pocket medical care costs; a $1 increase in out-of-pocket medical spending is predicted to increase future spending by an additional $2.80. These results may shed light both on the social value of catastrophic health insurance as well on aggregate saving behavior.