This paper criticizes Temin's hypothesis that the Great Depression was caused by an exogenous decline in consumption in 1930. Using Temin's own consumption function, as well as two other ones on the levels of the data, there is little support for Temin's hypothesis. First difference regressions support Temin's hypothesis if one uses a dummy variable for 1930. But if one looks instead at the residuals from the regressions, then the data provide only very limited support for it.
The distortion of the labor/leisure choice by social security during the period the earnings test is in effect is well known. This paper, using a life-cycle asset maximization approach to social security acceptance, shows that the earnings test is not a sufficient cause for such a distortion in the constrained period or over the life cycle. We use time-series analysis to test the net empirical importance of the substitution and wealth effects associated with social security on the market work of younger men and find that hours worked per week would have fallen from 2 to 3 hours since 1936 without the present social security system. Such findings suggest that large savings effects associated with social security are over-estimates.
This paper examines the joint determination of labor contract length and the degree of wage indexation in a neoclassical model modified to incorporate short-term wage rigidities and uncertainty, both real and monetary. A number of propositions are demonstrated. Optimal indexing may not insulate the real sector from unanticipated monetary shocks. For any given degree of indexing, contract length decreases with the level of uncertainty and increases with the cost of contracting. If indexing is costly, indexing provisions will appear only in longer contracts. The proportion of contracts indexed will increase with the variance of monetary disturbances. Finally, monetary variability may cause resource misallocation among industries. Some related policy implications are noted.
In a Samuelson overlapping-generations model, conditions for an operative interegenerational transfer motive are derived without special assumptions about the form of the utility function. Crucial in determining if transfers will be positive is the rate at which individuals discount heirs' utility relative to the market interest rate. It is also shown that transfers of human capital (such as investment in education) are not equivalent to ordinary bequests for the bonds-as-net-wealth controversy. If intergenerational transfers take the form of human capital, issuance of government bonds or social security can affect the equilibrium solution, even if the transfer motive is fully operative.
Changes in the money supply are expected to affect the nominal rate of interest in opposite directions: the liquidity and credit effects tend to depress the rate, while higher inflationary expectations work in the opposite direction. Theoretical studies suggest that, although liquidity and credit effects initially dominate, they are eventually more than offset by the expectations effect. These results are confirmed in countries of mild inflation. The results obtained here for a highly inflationary country--Argentina--indicate that the expectations effect is dominant and that any change in the rate of monetary disequilibrium was fully transmitted to the nominal interest rate.
In this paper a model is developed that explains the allocation of an individual's time among work and two types of leisure activities: time spent with spouse, and time spent with paramour. Data from two recent magazine surveys are available that can be used to test the predictions of the model regarding the determinants of time spent with paramour. The results of estimating the equation explaining time spent with paramour, by the Tobit estimator, are generally supportive of the model, although more evidence is needed before any definitive conclusions can be drawn. The model can also be applied to the allocation of time among other types of leisure activities.
This paper constructs a model of trade in which an intermediate good is produced by an "Austrian" point-input-point-output process of variable duration while the finished good is produced instantaneously by labor alone. The rate of time preference is a function of the level of stationary consumption and the two countries differ in the rate at which they discount the future. It is shown that the less "impatient" country will export the time-intensive intermediate good and import the finished good, with both countries incompletely specialized and the rate of interest and real wage equalized.
A dynamic linear demand schedule for labor is estimated and tested. The hypothesis of rational expectations and assumptions about the orders of the Markov processes governing technology impose overidentifying restrictions on a vector autoregression for straight-time employment, overtime employment, and the real wage. The model is estimated by the full-information maximum-likelihood method. The model is used as a vehicle for reexamining some of the paradoxical cyclical behavior of real wages described in the famous Dunlop-Tarshis-Keynes exchange.