Knowledge that Transforms

Incentives for specialization, trade, and the production of comparative advantage through investment are shown to arise from increasing returns to utilization of human capital. Indivisibilities imply fixed-cost elements of investment that are independent of subsequent utilization. Hence the rate of return is increasing in utilization and is maximized by utilizing specialized skills as intensively as possible. Identically endowed individuals have incentives to specialize their investments in skills and trade with each other for this reason, even if production technology exhibits constant returns to scale.

The size and rapid growth of the Hispanic population in the United States raise many questions about the effects of language on the process of economic assimilation. This paper uses data on earnings for 1975 to explore the role of English language proficiency in the assimilation of Hispanic men into the U.S. labor market. The results are strong: differences associated with English language skills explain virtually all of the Hispanic wage differences usually attributed to ethnicity, national origin, and time in the United States. The analysis is completed by relating the measure of English language proficiency to assimilation-related variables.

info:eu-repo/semantics/published

A LLAN MELTZER has given the economics profession an interesting and alternative Monetarist prospective to Keynes' General Theory' (Meltzer, 1981). Although Professor Meltzer generously acknowledges our useful exchange on an earlier draft of his fascinating paper, there still remain many unresolved analytical disagreements regarding Keynes' theory. Some of these differences may be questions of interpretation, hence open to differing views, but there is at least one vital relationship in Meltzer's model that deserves an airing for Meltzer's version is (a) inconsistent with Keynes' model and (b) logically inconsistent within Meltzer's own restatement of Keynes' theory. The disagreement turns on the specification of the demand for labor function.