Knowledge that Transforms

This paper examines the extent to which information obtained from past geographic mobility affects both post-move job-search and earnings in subsequent migration [in the United States]. The study considers this linkage between past and present mobility by estimating earnings frontiers for various categories of interstate migrants partitioned by prior mobility history....[The] results demonstrate that migrant groups exhibiting high relative levels of human capital stock do not necessarily possess superior pre-move labor market information. It is also demonstrated that the incentive to acquire this pre-move information is tied to psychic cost and variation in this cost among migrant types. (EXCERPT)

This paper emphasizes the roles played by personal taxation and pension wealth in portfolio choice and composition. A theoretical discussion of the impacts of taxation and participation in social security and private pension systems on individual wealth allocation is followed by empirical evidence based on U.S. cross-section data. Both effects prove to be significant. Anticipated social security and private pension benefits exert a measurable influence on household portfolio allocation. Their omission from an asset demand model may lead to a misinterpretation of the impact of taxation on portfolio composition.

The presence of farm programs should directly affect the expectations of producers. This paper analyzes the formation of price expectations when price supports constitute an effective lower bound on the distribution of the expectations. We first investigate what the expected price would be if the usual rational expectations formula is used. This leads to a relationship that is not estimable. We suggest two alternatives -one based on a tobit approximation and the other based on a perfect prediction of when the support is going to be effective. Using a simplified model of the U.S. corn market, the methodology is demonstrated and compared to an alternative method of using futures prices as the expectation of harvest price. The analysis of supply response for the major U.S. field crops is made difficult due to government intervention in these markets. This intervention has been characterized by the use of price supports, acreage diversion, storage incentives, etc. during the last thirty years. Many studies have analyzed producer behavior in the presence of governmental involvement. Such studies have typically been concerned with modeling the effect of supports and diversions in an ex post sense rather than with how producers used the knowledge of farm programs to form their expectations. If producers are rational economic agents, their expectations of harvest prices should be conditioned both by free market forces and the type and degree of governmental intervention in the market. Of course, farm programs have varied in nature and extent during the past thirty years and it is doubtful that any structural model could capture their complexities. In this paper we attempt to introduce rational expectations in a simplified model of the U.S. corn market. In essence we focus on the formation of price expectations when price supports constitute an effective lower bound on the distribution of the expectations. We proceed by developing a theoretical model that connects the rational expectations model with a model of bounded price variation. It is shown that one representation that may characterize the corn market is a triangular structural system with endogenous switching. A full information maximum likelihood estimator is proposed for the system. Next an empirical model is specified and estimated. The model is evaluated in comparison to an augmented model that contains a futures price so that some inferences may be made concerning the rational expectations model's success in summarizing relevant market information. Expectations Under Bounded Prices Consider a market that may be represented by a simple supply and demand system Q= a,Pt* + a2W, + el, Supply Function Pt= b,Qt + b2Xt + e2t Demand Function (1) where P and Q represent market price and quantity, W and X represent supply and demand shifters, and P,* represents the rational expectation of product price at the time production decisions are made. Note that this system has a familiar recursive structure when the expected price variable is specified in terms of one or more lagged prices. When the restricted reduced form of the structural system is solved for in terms of the expected price and this expression is used to replace Pj* (Wallis (1980)) then models similar to those of Goodwin and Sheifrin (1982) and Shonkwiler and Emerson (1982)

This paper analyzes the potential market power of western states in setting coal severance taxes and the emphasis placed by these states on the development of their coal resources vs. obtaining tax revenues. Three market structures are analyzed. One involves a western regional cartel, setting taxes collectively. The other cases are noncooperative tax equilibria with Montana and Wyoming competing against each other. We conclude that the western states seem to be primarily concerned with revenue collection and are very efficient extractors of economic rent.

Giora Hanoch, Marjorie Honig, "True" Age Profiles of Earnings: Adjusting for Censoring and for Period and Cohort Effects, The Review of Economics and Statistics, Vol. 67, No. 3 (Aug., 1985), pp. 383-394

Environmental regulations set maximum allowable rates for sulfur dioxide emissions from electric utilities. By ignoring firm differences in marginal abatement costs and preventing emissions trading, these standards do not minimize the cost of reducing einissions. This paper estimates marginal abatement cost functions for 56 utilities for 1973-79. Marginal costs vary substantially across firms due to differences in the price of low and high sulfur fuels and the intensity of regulation. The potential savings from a cost minimizing reallocation of abatement resources are estimated for five regions. Current expenditures are found to be 47% higher than cost minimizing levels. I MPLEMENTATION of the 1970 Clean Air Act Amendments relies extensively on technology-based emission standards. Economists long have recognized that these standards can result in an inefficient allocation of pollution control resources.' Engineering-based restrictions ignore or oversimplify differences in abatement costs among polluters. Limited empirical research suggests that current standards result in substantially higher costs, as much as ten times higher, than a cost-minimizing regulatory scheme.2 These studies, however, are based on engineering estimates of marginal abatement costs. The models often assume that all polluters adopt control technologies that are required only for new plants and that have been largely unadopted by polluting firms.3 The impact of changing factor prices on marginal abatement costs typically is ignored. The difficulty is that the resulting estimates of the cost of regulation neither adequately reflect the range of control options available to polluters nor take into account how polluters actually have responded to environmen-

This paper demonstrates that the data from a single market with nonlinear prices are consistent with a large set of underlying structural equations. By restricting the permitted functional form of the structural equations, the nonlinearity of marginal prices can be used to identify the price and shift parameters of a single member from the set. The identification approach must be used with great caution, however, because the true shape of supply and demand functions is often unknown and so the necessary restrictions may be unjustified.

The distributional impact of industrial pollution abatement is measured for the years 1973 and 1977. The findings indicate that in 1977 1.09% of income or 0.510% of personal consumption expenditures of the lowest income class paid indirectly for abatement costs implicit in purchased goods. For the highest income class, the corresponding figures were 0.218% and 0.423%, respectively. In addition, abatement costs per dollar of output are presented for representative industries.