There has developed over the last several years a large and growing literature on the relationship between local bank market structure and performance. Two characteristics of this development are particularly notable. First, a carefully structured microeconomic model of the banking firm is rarely used as the starting point of the analysis. Secondly, the possibility that local market structure may have a differential impact on bank performance in different activities seems to have escaped systematic investigation. Specifically, it is a contention of this study that an empirical investigation of structure and performance in banking must be grounded in the explicit development of a microeconomic model of the banking firm.

Robert H. Litzenberger, A. P. Budd, A Note on Geometric Mean Portfolio Selection and the Market Prices of Equities, The Journal of Financial and Quantitative Analysis, Vol. 6, No. 5 (Dec., 1971), pp. 1277-1282

This paper presents an empirical analysis of the determinants of negotiated wage changes using a pooled sample of time series observations for fourteen Canadian manufacturing industries. Data on individual contracts are used in an attempt to allow for the discontinuity of wage adjustments given the predominance of collective bargaining and variable contract length. Using a nonlinear formulation, profit levels, the unemployment rate, the rate of change of prices, and other variables are found to be statistically significant. DURING THE PAST decade a considerable amount of econometric research has been devoted to the explanation of movements in wages. Most empirical studies have used a basic disequilibrium model, first suggested by Phillips [11] in which the change in money wage rates is related to the level of unemployment. By relaxing some of the more rigid theoretical assumptions, the basic Phillips curve explanation has been expanded to include a number of other variables such as profits, prices, productivity, employment mix, etc. While many of these studies have provided valuable insights into the wage determining process, the statistical approaches used have often failed to deal adequately with the institutional features of the labor market. These statistical problems are briefly discussed in Section 1 of the paper and our own empirical analysis using data on individual contracts in Canada is presented in Section 2. The main implications of our study for the aggregate Phillips curve are given in Section 3.

gives opportunity-cost/marginal-product meanings to the factor prices. Unfortunately, this is not good enough. If one wants to compute social costs of a project in terms of the economy's long-run equilibrium, then the project's physical factor requirements should also be computed in this framework, allowing for the factor-substitution possibilities which exist in the long run and which are instrumental in assuring positive marginal products for all the primary resources. To conclude, while we agree with HK that in the presence of unemployed resources money expenditures on a project overestimate social costs, we do not believe (for the reasons given in this note) that the HK model allows computation of the correct adjustments.10