Knowledge that Transforms

This paper develops a model of unemployment rate dynamics that provides an explanation of persistent cyclical unemployment that does not involve persistent expectational errors or other nonoptimizing behavior. Our results are based on the interaction of search dynamics and inventory adjustments. An important element in these dynamics appears to be heterogeneity in the labor force which can be characterized as consisting of a relatively small group of high turnover individuals who comprise the bulk of normal unemployment and a larger group of low turnover individuals who dominate movements in cyclical unemployment. Our empirical results provide support for this theory as we demonstrate that the appropriately measured probability of becoming employed during a recovery falls relative to normal because of the unusually high proportion of low turnover individuals who have lost permanent jobs. As aresult, recovery is much slower than is indicated by normal relationships although each individual is searching optimally.

The theory of investment, which relates investment to the ratio of market to replacement value of capital, has attracted considerable attention in a recent series of papers. For instance, a q variable has been used as an independent variable in empirical investment equations estimated by George von Furstenberg (1977), von Furstenberg et al. (1980), Burton Malkiel et al. (1979), and others. These papers, however, leave somewhat unclear the theoretical rationale for using q as an investment determinant. This has motivated work by Hiroshi Yoshikawa (1980), Lawrence Summers (1981), Michael Salinger and Summers (1981), and Fumio Hayashi (1982), who show that under certain conditions the rate of investment of a sharevalue-maximizing firm is indeed a function of q. This is an important result because it shows that investment equations with q an independent variable are not ad hoc constructions. Rather, they are grounded in a theory of the firm with an appealing behavioral hypothesis, viz, value maximization. An important assumption underlying this research is that capital can be treated as a homogeneous good. Of course, this is an extremely common assumption in the analysis of investment, and is not particularly more bothersome in the q theory context than elsewhere. Nonetheless, there are certain situations where it may be desirable or even essential to be able to study investment disaggregated by type of capital good. Thus, the purpose of this paper is to examine whether and how the q theory can be extended to this more general case.1 Intuitively, one would expect some difficulty with the q theory in the many-capitalgood context, as already noted by James Tobin and William Brainard (1977, p. 243) and by Salinger and Summers (p. 12). One way to see why is to recall the Tobin-Brainard distinction between marginal and average q. As Hayashi writes,

While human capital has been used with some success to analyze recent changes in racial income differences, scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill-based theories as applied to racial questions. The challenge they raise is legitimate. Put simply, if measured skill disparities between the races narrowed throughout the twentieth century, why did income ratios first begin to converge in the 1960's? In this paper, I address this question relying on some unexploited census data by race on education, literacy, occupations, and income. Using these data that begin with the 1890 Census, I present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts. In addition to reconciling the apparently inconsistent skill and income series, these income ratios offer a very different historical record than many economists believe to have been the case. To cite a prominent example, Gunnar Myrdal's classic work (1944) saw the economic position of his contemporary black America not only as dismal, but made even more so by its sense of hopelessness, given the absence of any hint of progress or change. While Myrdal's pessimism is understandable, it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men.

The predominant ranking criterion for judging the comparative quality of economics departments has been the faculty publication record in a set of major journals.' In this tradition is a recent article which generates rankings based on volume of pages published in twenty-four top journals during 1974-78 (Philip Graves et al., 1982). Separate rankings are calculated for total and per capita contributions, and credit is accorded to the institution at which the author is employed at the time of publication.2

According to recent estimates, federal budget outlays for research and development (RD this component will rise 28 percent, and absorb 70 percent of all federal R&D spending in 1984, compared to under 50 percent in 1980. Since work corresponding to about one-half of the dollar value of the federal R&D program is generally performed by private industrial firms under contract with federal agencies, the rapid increase in federal R&D outlays will presumably be reflected in a similar increase in the value of commitments by industrial firms to perform government R&D. One of the most important economic questions posed by the large prospective increase in resources allocated to federal contract R&D concerns its consequences for the economy's rate of technical progress, of productivity growth. In the next section I argue that the ultimate impact on productivity depends on how company decisions to finance R&D are affected by the availability of federal contract R&D funds. I then provide a brief review and critique of previous studies of the relationship between companyand federalfinanced R&D performed in industry, and present new estimates which differ from existing ones with respect to both methodology and implications. These estimates are consistent with the hypothesis that increases in federal R&D activity tend to be associated with significant reductions in companyfinanced R&D. A number of studies have attempted to determine the ceteris paribus effects of company and federal R&D on the rate of productivity growth (P) by estimating variants of the equation

Analyzes the ultra-free entry as normative contribution to industrial organization. Ultra-free entry in context of the evolving field of industrial organization; Assessment of the conceptual validity of William Baumol, Elizabeth Bailey John Panzar and Robert Willig's analysis in representing the nature of competition; Empirical issues in measuring and testing ultra-free entry. (Из Ebsco)

Stiglitz dissects the relationship between price rigidities and market structure.