[Survey data provide a measure of exchange rate expectations superior to the forward rate in that no risk premium interferes. We estimate extrapolative, adaptive, and regressive models of expectations. Static or "random walk" expectations and bandwagon expectations are rejected: current appreciation generates the expectation of future depreciation because variables other than the contemporaneous spot rate receive weight. In comparing expectations to the process governing the spot rate, we find statistically significant bias.]

Alternative wage structures under conditions of moral hazard are analyzed from a social-welfare standpoint. It is argued that ex post equity judgements in an uncertainty context should incorporate a preference for "positive correlation" of utilities of different individuals. In the design of compensation schemes, this may give rise to a conflict between ex post equity objectives and the need to provide effort incentives: relative performance clauses in compensation schemes that are useful for providing incentives are undesirable from an ex post equity standpoint.

Jack L. Knetsch, J. A. Sinden; The Persistence of Evaluation Disparities*, The Quarterly Journal of Economics, Volume 102, Issue 3, 1 August 1987, Pages 69

The Financial Accounting Standards Board (FASB) is soliciting empirical evidence on the accuracy of price indexes for estimating the current cost of machinery and equipment in compliance with Statement #33. Recent studies indicated that measurement errors in current cost data appear to dominate the potential information content of the Statement #33 disclosures. This study investigates the sign, magnitude, and sources of the potential measurement error in the estimates of current cost generated by alternative levels of specificity of the Producer Price Indexes (PPI). The research method consists of statistical analyses to examine the distributional properties of the PPI estimates compared to the criterion variable of the actual current order price of the assets. The results Indicate that, in general, the measurement error tends to be an overstatement of new current cost. The major sources of measurement error appear to be product mix errors, pricing errors, and inadequate adjustments for quality change. Product mix errors seem to be the dominant factor for Electrical and Miscellaneous Equipment, pricing errors for General Purpose Equipment, and inadequate quality change adjustments for Machine Tools and Special Industry Equipment.

[The Financial Accounting Standards Board (FASB) is soliciting empirical evidence on the accuracy of price indexes for estimating the current cost of machinery and equipment in compliance with Statement #33. Recent studies indicated that measurement errors in current cost data appear to dominate the potential information content of the Statement #33 disclosures. This study investigates the sign, magnitude, and sources of the potential measurement error in the estimates of current cost generated by alternative levels of specificity of the Producer Price Indexes (PPI). The research method consists of statistical analyses to examine the distributional properties of the PPI estimates compared to the criterion variable of the actual current order price of the assets. The results indicate that, in general, the measurement error tends to be an overstatement of new current cost. The major sources of measurement error appear to be product mix errors, pricing errors, and inadequate adjustments for quality change. Product mix errors seem to be the dominant factor for Electrical and Miscellaneous Equipment, pricing errors for General Purpose Equipment, and inadequate quality change adjustments for Machine Tools and Special Industry Equipment.]

Many previous studies have found a strong positive effect of job seniority (tenure) on wages. This paper re-examines the evidence using a simple instrumental variables scheme to deal with the fact that tenure is likely to be related to unobserved individual and job characteristics that affect the wage. We use the variation of tenure over a given job match as the principal instrumental variable for tenure. The variation in tenure over the job is uncorrelated by construction with the fixed individual and job match specific components of the error term of the wage equation. Our main finding is that the partial effect of tenure on wages is small, and that general labour market experience and job shopping account for most wage growth over a career. The strong cross section relationship between tenure and wages is due primarily to heterogeneity bias.

This paper demonstrates, using the Reflection Principle, the existence and uniqueness of the solution to the classic Solow equation under continuous time uncertainty for the class of strictly concave production functions which are continuously differentiable on the nonnegative real numbers. This class contains all CES functions with elasticity of substitution less than unity. A steady state distribution also exists for this class of production functions which have a bounded slope at the origin. A condition on the drift-variance ratio of the stochastic differential equation alone, independent of technology and the savings ratio, is found to be necessary for the existence of a steady state.

Probability distributions for the duration of welfare spells are estimated. The principle guiding the work is that a recipient will not exit from welfare if the expected utility on welfare exceeds the expected utility of welfare. The analysis indicates that while the majority of welfare spells are of short duration, a nontrivial minority of spells are quite long. Those recipients with long spells are found to differ in predictable ways from those experiencing brief spells. This suggests that strategies to move women off welfare are unnecessary in many cases, and should be targeted on those most likely to be long-term recipients.

Findings do not indicate poorly-managed firms are more likely to be acquired than well-managed firms. The analysis uses a sample of 1, 046Texas banks that existed in 1970, out of which 201 were acqui red during the period 1970-82. A multinomial logit procedure is used to estimate the relationship between the likelihood of acquisition and the characteristics of the target firm and its market. Additional results suggest that firms with la rge market shares, low capital/asset ratios, and operations in urban areas are r elatively likely to be acquired but not firms with low profits or low growth.

Pooling consumption data from different countries for demand system estimation is attractive because it increases both sample size and therange of v ariation of relative prices and income. The major objection to pooling is that d ifferent countries may have different demand system parameters. This paper propo sed and estimates specifications that permit pooling while allowing both short-r un andlong-run demand systems to differ across countries. Using data from Belgi um, the United Kingdom, and the United States, the authors findthat, although p ooling was accepted for some pairs of countries and some specifications, it was rejected for most. They conclude that caution is appropriate in pooling internat ional consumption data.