Knowledge that Transforms

This paper develops and estimates a demand model to describe a household's demand for distance from a landfill with hazardous wastes. This model provides one basis for gauging the intensity of a household's desire to avoid living near this type of facility. Using the conceptual framework of a hedonic property value model to provide the basis for demand for distance questions, a survey in suburban Boston elicited this information from 609 households. The demand estimates imply that the average household would realize a consumer surplus between $330 to $495 annually for each mile between its residence and a landfill containing hazardous waste.

The impact of uncertainty in future income on the demand for education from both theoretical and empirical points of view is analyzed. Theoretical results deviate substantially from their counterparts in models of human capital formation with certain future income. The theory is tested with a sample of high school graduates that contains data on subjective expectations. Empirical evidence from binomial logit analysis does not entirely support the behavioral implications of the theoretical model.

This paper contains an analysis of the effect of inflation on aggregate tax evasion in the United States over the period 1947-81. It is found that tax evasion in both absolute and relative terms is positively related to the inflation rate. Further, the results indicate that aggregate evasion has risen in both absolute and relative terms with increases in the marginal tax rate, but has fallen with increases in the detection probability, the penalty rate, and the wage share of income. Finally, evasion has risen in absolute terms but has fallen in relative terms when real true income has risen.

Much recent work emphasizes the joint nature of the consumption decision and the portfolio allocation decision. In this paper, we compare two formulations of the Capital Asset Pricing Model. The traditional CAPM suggests that the appropriate measure of an asset's risk is the covariance of the asset's return with the market return. The consumption CAPM, on the other hand, implies that a better measure of risk is the covariance with aggregate consumption growth. We examine a cross-section of 464 stocks and find that the beta measured with respect to a stock market index outperforms the beta measured with respect to consumption growth.

A health-oriented choice model is developed in which individuals are viewed as producers of health and good health is desired for both consumption and investment purposes. Individuals are able to adjust their consumption of medical care in order to defend against reductions in air quality. A compensating variation type marginal willingness to pay expression is derived for improved air quality and the model is tested using cross-sectional data on employed adult residents of St. Louis, Missouri. Estimates of marginal willingness to pay for the average employed person are derived for a 30% reduction in ozone. These values range from $18.45 to $24.48 per year.

Recently a number of authors have criticized the role of devaluations in traditional stabilization programs.It has been argued that, contrary to the traditional view, devaluations are contractionary, and generate a decline in aggregate output.In spite of the renewed theoretical interest in the possible contractionary effects of devaluations, the empirical evidence on the subject has been quite sketchy.In this paper the Khan and Knight (1981) model is extended to empirically address the issue of contractionary devaluations.The extended model considers the effect of money surprises, fiscal factors, terms of trade changes and devaluations on the level of real output.The results obtained, using a variance components procedure on data for 12 developing countries, provide some support to the short-run contractionary devaluation hypothesis; the results obtained indicate that in the short run a devaluation will generate a decline in aggregate output.It is also found that after one year a devaluation will have an expansionary effect on output.The evidence suggests that in the long run, devaluations will have no effect on output.

Abstrac-t-The profits of leading firms in concentrated markets may be due to market share related cost efficiencies or market power. One way to identify the separate effect of market power is to analyze the relationship of market concentration and market share to the prices charged by firms in local geographic markets. This study analyzes the prices charged by supermarkets in local Vermont markets. Prices are significantly higher in more concentrated markets. The Herfindahl index, as a concentration measure, out-performs the four-firm or one-firm concentration ratio. Herfindahl marginally out-performs a firm's market share as a predictor of its price level.