Knowledge that Transforms

Bar-Yosef, Sasson, and Richard Kolodny, Policy and Capital Market Theory, this REVIEW 58 (May 1976), 181-190. Black, Fischer, Michael C. Jensen, and Myron Scholes, The Capital Asset Pricing Model: Some Empirical Tests, in Michael C. Jensen (ed), Studies in the Theory of Capital Markets (New York: Praeger Publishers, Inc., 1972), 79-121. Black, Fischer, and Myron Scholes, The Effects of Dividend Yield and Dividend Policy on Common Stock Prices and Returns, Journal of Financial Economics 1 (Jan. 1974), 1-22. Fama, Eugene F., and Harvey Babiak, Policy: An Empirical Analysis, Journal of the American Statistical Association 63 (Dec. 1968), 1132-1161. Fama, Eugene F., and James D. MacBeth, Return, and Equilibrium: Empirical Tests, Journal of Political Economy 81 (May-June 1973), 607-636. Lintner, John, Distribution of Incomes of Corporations among Dividends, Retained Earnings and Taxes, American Economic Review 46 (May 1956), 97-113. Miller, Merton H., and Franco Modigliani, Policy, Growth, and the Valuation of Shares, Journal of Business 34 (Oct. 1961), 411-433. Miller, Merton H., and Myron Scholes, Rates of Return in Relation to Risk: Re-examination of Some Recent Findings, in Michael C. Jensen (ed), Studies in the Theory of Capital Markets (New York: Praeger Publishers, Inc., 1972), 47-78. Pettit, R. Richardson, and Randolph Westerfield, A Model of Capital Asset Risk, Journal of Financial and Quantitative Analysis 7 (Mar. 1972), 1649-1668.

Robert D. Auerbach, Jack L. Rutner, The Misspecification of a Nonseasonal Cycle as a Seasonal by the X-11 Seasonal Adjustment Program, The Review of Economics and Statistics, Vol. 60, No. 4 (Nov., 1978), pp. 601-603

Vernon Oley Roningen, The Effect of Exchange Rate, Payments, and Trade Restrictions on the Trade Between OECD Countries, 1967-1973, The Review of Economics and Statistics, Vol. 60, No. 3 (Aug., 1978), pp. 471-475

Carnoy, Martin, Class Analysis and Investment in Human Resources: Dynamic Model, Review of Radical Political Economics 3 (1971), 56-81. Corcoran, Mary, Christopher Jencks, and Michael Olneck, Effects of Family Background on Earnings, The American Review 66 (May 1976), 430-435. Duncan, Otis Dudley, A Socio-Economic Index for all Occupations, in Albert J. Reiss, Otis Dudley Duncan, P. K. Hatt, and C. C. North (eds.), Occupation and Social Status (New York: Free Press of Glencoe, 1961). Fishlow, Albert, and Human Capital: Some Further Results for Brazil, mimeograph, 1974. Griliches, Zvi, and William M. Mason, Education, Income and Ability, Journal of Political Economy 80 (May/June 1972), S74-S103. Kasnakoglu, Zehra, Distribution in Turkey: Study on the Determinants of Male Earnings Differentials in 1968, Ph.D. thesis, University of Wisconsin, Madison, 1975. , A Study on the Determinants of Male Income Differentials in Turkey for 1968, Hacettepe Bulletin of Natural Sciences and Engineering 5 (June 1976), 90-122. Mincer, Jacob, Schooling, Experience and Earnings (New York: Columbia University Press, 1974). Morgenstern, Richard D., Direct and Indirect Effects on Earnings of Schooling and Socio-economic Background, this REVIEW 55 (May 1973), 225-233. Ribich, Thomas L., and James L. Murphy, Economic Returns to Increased Educational Spending, Journal of Human Resources 10 (Winter 1975), 56-77.

R ECENT theoretical and empirical analysis of unemployment has emphasized its dynamic character: flows into and out of unemployment are very substantial in relation to the stock of unemployed individuals,' and groups with high unemployment rates tend to be those whose members experience short but frequent spells of joblessness (Hall, 1970). This view of unemployment has afforded important new insights into the question of why average unemployment rates differ so markedly across certain labor force groups, and has led to major shifts in the focus of labor market policy. For example, the discovery that the higher unemployment rates of blacks are due almost entirely to the higher frequency of jobless spells they experience (Perry, 1972) has shifted emphasis away from policies that stimulate demand toward policies that will help to reduce job turnover. Existing studies have focused almost exclusively on differences in the average values of the duration and frequency of spells of unemployment between certain labor market groups; none has examined systematically the variation in unemployment spell lengths and frequencies across individuals. This paper seeks to fill this gap by examining the relative contributions of unemployment frequency and unemployment duration to the distribution of total hours of unemployment across individuals within each of several important labor force groups. Dispersion in the distribution of unemployment across individuals results when either the length or frequency of unemployment spells is unevenly distributed across individuals. This dispersion is reinforced when the length and frequency of spells are positively correlated, i.e., when those individuals who have the greatest difficulty finding jobs (the last hired) tend to be the same individuals who experience the greatest difficulty keeping them (the first fired). The principal contribution of our study is that it enables the variations in individual unemployment experience to be linked explicitly to individual variations in the length and frequency of unemployment spells. Section II below outlines a probabilistic model of individual labor market transitions that serves as the basis for our empirical estimation procedures. In section III we then describe the data employed in our study (the National Longitudinal Survey) and present our estimates of the distributions of individual transition probabilities for each of four demographic groups. Section IV examines the effect of a business cycle downturn on the unemployment experienced by individuals in these groups.

An effort is made to provide a more satisfactory test of the usefulness of effective tariff rates in determining resource movements by comparing effective rates of protection calculated for South Africa for two points of time with resource shifts over the same time. Also tested are whether the ''high'' and ''low'' effective rates and percentage changes in effective rates predict resource shifts better tha the complete scale of rates. The authors then test the conclusion that resources have been attracted to only those sectors that have very high effective rates or large percentage changes in effective rate and examine the association between nominal tariff rates and resource allocation. Cohen in 1969 and Guisenger and Schydlowsky in 1970 showed that there is a high correlation between nominal and effective rates, which raises the question of whether it is worth calculating effective tariff rates if nominal rates are close substitutes. 14 references.

OVER the past decade, the post-war United States position in favor of free trade has been strongly attacked by those who have invested in and are employed in industries facing significant competition from imports. Since factors of production are temporarily tied to a particular industry, all factors in contracting industries experience economic losses of a short-run nature. This paper considers to what extent these short-term losses alter the welfare evaluation of free trade policies. A second intent, based on the analytical framework developed to resolve the first point, is to determine when a tariff reduction may be preferable to tariff removal and how such tariff reductions may be effectively carried out over time. In the literature of trade policy, it has been shown that in a two-good general equilibrium model under the assumption that factors of production are immobile, the gains from free trade will be reduced but remain positive if no distortions exist (Haberler, 1950; Johnson, 1965). More recently, studies have focused on the short-run distributional effects of changing international prices. Capital has been postulated to be immobile between the two industries and relative factor prices perfectly flexible (Mayer, 1974; Mussa, 1974). In this paper the analysis is based upon the situation where factor-price rigidities exist in addition to factor immobility. Under these circumstances changes in international prices result in unemployment. The economy is moved inside its long-run production possibilities frontier, and any welfare assessment of a free trade policy must allow for the second-best effect of this factor-market distortion. Because the short-run effect may be negative, the question arises whether the long-run welfare gain for a small country offsets this loss.' This study treats imports and domestic competing goods as imperfect substitutes, and allows for the effects of short-run output price rigidities. Limitations of the analysis are that only unilateral tariff reductions are dealt with empirically, and terms-of-trade effects are ignored.2 The model is used to evaluate the welfare cost of current tariff barriers for five disaggregated industries: industrial chemicals, iron and steel, machine tools, electrical machinery, and motor vehicles. One issue that falls out of this approach is whether an intermediate position between free trade and the current level of restrictions is preferable, given the existence of factor-market distortions. It is shown empirically that complete tariff removal generally will not be optimal in terms of economic efficiency and that phased reductions of tariffs over time will be preferable to a single tariff cut. Section I is concerned with the determination of benefits and social costs from tariff removal. Since United States trade policy often is determined in the context of unilateral policy changes affecting a single disaggregated industry, the empirical calculations presented in