Knowledge that Transforms

Recent confirmation of sheepskin effects in the returns to education for prime age white males has been taken as evidence of screening or signaling in the labor market. The authors report evidence of sheepskin effects among women and minority males, and demonstrate that they are somewhat smaller for lower diploma years, but larger for higher diploma years, than those of white males. These are among the first broad-based results confirming the frequent contention derived from signaling models that minorities have smaller returns to low productivity signals, but larger returns to high productivity signals. Copyright 1991 by MIT Press.

Minoru Okamura, Estimating the Impact of the Soviet Union's Threat on the United States-- Japan Alliance: A Demand System Approach, The Review of Economics and Statistics, Vol. 73, No. 2 (May, 1991), pp. 200-207

Two types of moral hazard have been determined. The first type is related to self-prevention activities affecting probabilities of accidents. The second type relates to the agent's activities whenever the accident occurs. The authors' objective consists of presenting an empirical measure of the significance of this second type of moral hazard in the workers' compensation market. The main challenge in isolating moral hazard consists of dividing into two parts the total variation in recovery time with respect to changes in insurance coverage: (1) the variation of consumption corresponding to a given level of information; and (2) the variation of consumption due to greater asymmetrical information. The methodology used in this study separates these two variations. Copyright 1991 by MIT Press.

Surveys of individual's risk-dollar trade-offs illuminate not only the local trade-off rates, but also can be used to address more fundamental questions about the structure of utility functions. This largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk-dollar trade-offs for minor health effects. The empirical tests indicate that for all but one of the temporary health effects considered, consumers treat injuries as tantamount to a drop in income, implying that the health impact does not alter the structure of the utility function in a fundamental way. Copyright 1991 by MIT Press.

Males who participated in intercollegiate athletics are estimated to receive 4 percent higher annual incomes than similar nonathletes. No such income premium associated with college athletics is revealed among females. Both male and female athletes who attended colleges and universities in the early 1970s had higher graduation rates than other students. Since the models used to estimate income and graduation differentials included many measurable determinants of labor market and academic outcomes, these findings suggest that athletic participation may enhance the development of discipline, confidence, motivation, a competitive spirit, or other subjective traits that encourage success. Copyright 1991 by MIT Press.

This paper utilizes unique survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 U.S. companies during the 1970s. Market value and earnings are estimated to be about 10 percent-15 percent lower in an average unionized company than in a nonunion company, following extensive control for firm and industry characteristics. Deleterious union effects on firm profitability are sizable throughout the 1972-80 period, but vary considerably across industries. The relatively poor profit performance of unionized companies may help explain the recent decline in U.S. union membership. Copyright 1991 by MIT Press.

The authors estimate the probability that a price fixing conspiracy will be indicated by federal authorities to be at most between 0.13 and 0.17 in a given year. The authors' estimate is based on conspiracy durations calculated from data reported for a large sample of Department of Justice cases, and a statistical birth and death process model describing the onset and duration of conspiracies. Copyright 1991 by MIT Press.

This paper offers empirical evidence which counters two opposing but frequently expressed views concerning the market for popular music. The first view is that the consumers of popular music have no recognition of or appreciation for "quality" or "ability" in singing. The second is that the market is an example of the "Superstar Phenomenon, " in the Marshall-Rosen sense, wherein small differences in ability are magnified into disproportional levels of success. Using an external measure of "voice quality, " provided by the literature on voice, the estimated elasticity of record sales to voice quality is found to be significantly greater than zero but less than one. Copyright 1991 by MIT Press.

This study estimates translog variable cost functions for 147 American doctorate granting universities, accounting for three major products of these institutions: undergraduate and graduate instruction, and research. Explicit measures of research output and quality are employed. Evidence is found for considerable economies of scale for the average institution, as well as economies of scope related to the joint production of undergraduate and graduate instruction. The public or private ownership of an institution is not significant for the explanation of variable costs. The intensity of state regulation in the public sector does not have a significant impact on production efficiency. Copyright 1991 by MIT Press.