Knowledge that Transforms

In econometric analysis, occasionally some of the regressors are not available. In this paper, the authors study the implications of two strategies: either cancel these regressors from the model or use proxy variables instead. It is analyzed which of both strategies leads to an improvement in conditional prediction of the systematic part in terms of the mean square error criterion. Furthermore, some characterizations for admissibility are given. Copyright 1993 by MIT Press.

Reza M. Ramazani, Keith E. Maskus, A Test of the Factor Endowments Model of Trade in a Rapidly Industrializing Country: The Case of Korea, The Review of Economics and Statistics, Vol. 75, No. 3 (Aug., 1993), pp. 568-572

This study analyzes the important increase in the rate of profit which occurred in the United States during World War II. The gap between the predepression trend line, from 1900 to 1929, and the postwar line, from 1946 to 1989, is estimated as a shift of 15.8 percent in absolute terms (to be compared with an average of 29.0 percent over the whole period). Using a production function analysis, the authors demonstrate that this transformation can be explained by an acceleration in the rate of 'autonomous progress' between 1930 and 1945. They identify a sudden and nonneutral discontinuity in the process of technical change, characterized by an autonomous substitution of equipment for structures. Copyright 1993 by MIT Press.

Despite the presence of anecdotal evidence linking regional economic growth and the presence of quality universities in such areas as the Silicon Valley in California and Route 128 in Boston, there have been few systematic studies of the relationship between universities and local economies. In this paper we examined the relationship between four measures of the quality or extent of activities of colleges and universities in an area and various measures of the local labor market activity, including employment, income and migration.

This paper focuses on the existence of liquidity constraints on housing purchases by Japanese households. In order to assess the impact of liquidity constraints, the author analyzes the housing purchase behavior of worker households which rent and in which the household head was under the age of forty-five from the National Survey of Family Income and Expenditure compiled by the Statistics Bureau. Liquidity constraints emerge as the most important factor in determining housing purchase behavior. Copyright 1993 by MIT Press.

Edward T. Gullason, Bharat R. Kolluri, Michael J. Panik, Social Security and Household Wealth Accumulation: Refined Microeconometric Evidence, The Review of Economics and Statistics, Vol. 75, No. 3 (Aug., 1993), pp. 548-551

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Use of disappearance data as proxies for actual consumption causes inconsistent estimates of own-price retail demand elasticities. A system of equations describing consumer, processor, and producer behavior is used to consistently estimate the retail demand elasticity for beef using available data while avoiding the restrictive assumption of fixed input proportions implicit in disappearance data. This approach yields an estimate of the own-price retail demand elasticity for beef of -0.45, which is more inelastic than the estimate (-0.66) obtained using a traditional approach. The methodology is applicable to other food commodities for which disappearance data serve as proxies for actual consumption. Copyright 1993 by MIT Press.

A calculation of the stochastic properties of consumption when income follows a fractional stochastic process, showing how this may explain excess-smoothness results noted in previous studies.

Mario J. Miranda, Joseph W. Glauber, Estimation of Dynamic Nonlinear Rational Expectations Models of Primary Commodity Markets with Private and Government Stockholding, The Review of Economics and Statistics, Vol. 75, No. 3 (Aug., 1993), pp. 463-470