To test a model of rational addiction, we examine whether lower past and future prices for cigarettes raise current cigarette consumption. The empirical results tend to support the implication of addictive behavior that cross price effects are negative and that long-run responses exceed short-run responses. Since the long-run price elasticity of demand is almost twice as large as the short-run price elasticity, the long-run increase in tax revenue from an increase in the federal excise tax on cigarettes is considerably smaller than the short-run increase.

In 1940 the average worker in the United States had 9.2 years of schooling; by 1990 the average had increased to 13.3 years. Although education levels show a dramatic upward trend, there is no corresponding long-term trend toward lower economic rewards from schooling. In fact, the return to schooling increased in three of the five postwar decades and is higher in 1990 than it was in 1940.1 In our opinion, the tremendous growth in the supply of more-educated labor with no corresponding reduction in relative wages is evidence that the demand for education increased greatly between 1940 and 1990 (see Murphy and Welch [1992] for a similar argument for the 1970-1989 period). In this paper we examine changes in the occupational wage and employment structure at ten-year intervals from 1940 to 1990 in an attempt to identify and quantify some of this increased demand for skill. Our analysis is based on the five Decennial Census files from 1940 to 1980 and the Current Population Surveys for 1978-1982 and 1989-1991. Not surprisingly, our findings support the view that the demand for skill increased significantly over the 1940-1990 period. Over the full period and for each of the five decades, we find that employment shifted from less-educated and lower-paid occupations toward more-educated and higher-paid occupations. We interpret this shift in employment patterns as evidence of a shift in demand. We do not find that the demand for skill grew particularly rapidly during the 1970's and 1980's, a period when wage inequality expanded in comparison to the three earlier decades when the trend was either toward less wage inequality or when wage inequality increased only modestly.

[This paper challenges the widely accepted stylized fact that chief executive officers (CEOs) in the United States are paid significantly more than their foreign counterparts. Using CEO pay data across fourteen countries with mandated pay disclosures, we show that the U.S. pay premium is economically modest and primarily reflects the performance-based pay demanded by institutional shareholders and independent boards. Indeed, we find no significant difference in either level of CEO pay or the use of equity-based pay between U.S. and non-U.S. firms exposed to international and U.S. capital, product, and labor markets. We also show that U.S. and non-U.S. CEO pay has largely converged in the 2000s.]

U.S. beef cattle stocks are among the most periodic economic time series. A theory of cattle cycles is constructed on the basis of breeding stock inventory decisions. The low fertility rate of cows and substantial lags and future feedback between fertility and consumption decisions cause the demographic structure of the herd to respond cyclically to exogenous shocks in demand and production costs. Known demographic parameters of cattle imply sharp numerical benchmarks for the resulting dynamic system and closely compare with independent econometric time-series estimates over the 1875-1990 period. The model fits extremely well.

Our analysis of growth assumes endogenous fertility and a rising rate of return on human capital as the stock of human capital increases. When human capital is abundant, rates of return on human capital investments are high relative to rates of return on children, whereas when human capital is scarce, rates of return on human capital are low relative to those on children. As a result, societies with limited human capital choose large families and invest little in each member; those with abundant human capital do the opposite. This leads to two stable steady states. One has large families and little human capital; the other has small families and perhaps growing human and physical capital.

This paper explores Rosenstein-Rodan's idea that simultaneous industrialization of many sectors of the economy can be profitable for them all even when no sector can break even industrializing alone. We analyze this idea in the context of an imperfectly competitive economy with aggregate demand spillovers and interpret the big push into industrialization as a move from a bad to a good equilibrium. We present three mechanisms for generating a big push and discuss their relevance for less developed countries.

Executive compensation consultants face potential conflicts of interest that can lead to higher recommended levels of CEO pay, including the desires to “cross-sell” services and to secure “repeat business.” We find evidence in both the US and Canada that CEO pay is higher in companies where the consultant provides other services, and that pay is higher in Canadian firms when the fees paid to consultants for other services are large relative to the fees for executive-compensation services. Contrary to expectations, we find that pay is higher in US firms where the consultant works for the board rather than for management.